Buying a home is an exciting and significant milestone in anyone’s life. But of course, the entire process of buying a home requires meticulous planning, research, and the right resources. By arming yourself with knowledge and tools, you can prepare yourself to navigate the journey and achieve your goals.
Here at Money Compare, we understand that knowledge is power, and it bolsters our ability to make informed decisions. We have put together a comprehensive guide to walk you through the process of buying your first home in New Zealand, so you can hopefully feel a little bit more prepared to take on this adventure.
Early Preparations
Establish Goals and Budget
What are your homeownership goals? Do you plan to find a place to settle down with your family? Or a long-term investment. It’s also important you figure out how much you can afford, both for your deposit, and the home loan.
Save for Your Deposit
Most home deposits are 20% of the home value. However, some first home buyers may be eligible for just a 5% deposit. You can ask a mortgage broker if you may be eligible for this. It’s time to start setting up strategies for saving money. Create a budget by tracking your expenses and spending habits, and determine where you can cut back. Be sure to compare savings accounts to find the right one for your needs. You can also increase your KiwiSaver contributions.
Understand Mortgage Jargon
It’s a good idea to familiarise yourself with the terms and concepts of mortgages and home loans. Key terms include interest rates, loan terms, repayment options and different types of mortgages.
Explore Finance Options
Jump on Money Compare
Money Compare is teeming with lots of resources to help you have a better understanding of what options are available. Jump onto our comparison tool to compare lenders and familiarise yourself with mortgage rates. You can also use our affordability tools to calculate how much you can afford to borrow and estimate your mortgage repayments, which can be great for helping you plan and budget for your future mortgage. It’s important to also consider additional expenses such as house and contents insurance, council rates, and property maintenance.
Compare Home Loans
Be sure to compare home loans and rates with Money Compare’s comparison tool. Our platform features mortgage products from lenders you may not be aware of. It’s a good idea to have an understanding of all the options available to you, so you can make an informed decision. Be sure to also consider fees, terms and flexibility.
Deposit and Earnings
How Much Will You Borrow?
The amount of the deposit, while generally 20% of the property value, can depend on several factors such as location, property type, and the lending criteria. You can use our handy mortgage calculator to help figure out how much you could borrow based on some quick questions.
There are other factors that lenders consider when determining how much you can borrow. They will consider your income and expenses. Therefore, you should assess your current financial situation and carefully think about what you can afford. Can you afford the mortgage repayments and all the other costs associated with owning a home? This also includes other domestic bills such as broadband, power and water.
What is a mortgage test rate?
The mortgage test rate is a benchmark rate that lenders use to determine your ability to repay a home loan. This rate is often higher than the actual mortgage rate so that the lender can be sure that you can afford your repayments even if interest rates rise in the future. As interest rates are constantly fluctuating and changing with inflation, the mortgage rate assessment is designed to protect you and the lender against interest rate increases. You still want to be able to afford your mortgage repayments if rates increase!
Lower your expenses to increase your borrowing potential
You can increase your borrowing potential by lowering your expenses to improve your debt-to-income ratio. It’s important you can prove to lenders your ability to afford the mortgage repayments, which can be quite expensive, and higher than your rent payments. Here are some ways to reduce your expenses.
Budget: Create a spreadsheet or a document that tracks your income and expenses. Track your essential expenses and non-essential spending, and figure out where you can cut back. Can you limit your dining out, entertainment, and unnecessary spending?
Cut Subscriptions: How many streaming services do you have subscriptions to? And how many do you actually use? Cancel any you don’t use, such streaming services, gym memberships, or patreon subscriptions. You’ll be thankful for the extra cash!
Reduce Utility Bills: You can make simple changes around the home to reduce your bills. Lower your energy consumption and water use. Jump on NZ Compare’s comparison platforms to compare your broadband, power, mobile and other insurances such as car insurance. This is an effective way to unlock savings by empowering you to find a better deal. These savings will make a big difference to your budget!
Refinance High Interest Debt: High interest debt can be gobbling up your money. Consider refinancing high interest credit cards and personal loans to a lower interest rate, so you can unlock some savings that can go towards your mortgage repayments or your deposit.
Have a Discussion with a Qualified Mortgage Broker
What is a Mortgage Broker?
A mortgage broker is an expert at dealing with mortgages. They will help navigate you through the home buying process, from finding the right lender and home loan, and to settlement day. They have access to an extensive catalogue of lenders, and can provide personalised advice and help you with paperwork and negotiations.
Find a Qualified Mortgage Broker
Here at Money Compare, we can help match you with an experienced and reputable mortgage broker. When you are searching for the right professional, be sure to check qualifications, ask for recommendations, and have a good chat with a potential mortgage broker to make sure you are comfortable and a good match.
Take Advantage of a Mortgage Broker’s Services
Mortgage brokers can negotiate with lenders on your behalf, and use their fine tooth skills to find you the right mortgage for your unique needs.
Buying a House
Determine your Property Requirements
Before you rush out to open homes, be sure to determine your property requirements. Identify your location, property size and type, the amenities, and local amenities such as nearby grocery stores, cafes, parks, and proximity to schools and public transport.
Make an Offer and Negotiate
Once you have found the home of your dreams, be sure to have an understanding of how to make an offer and negotiate with sellers. There are generally two types of offers. An unconditional offer, and a conditional offer, which is typically an offer with conditions attached such as having a satisfied builder’s report.
Be sure you have done your due diligence with the property, and conduct building inspections, including a LIM report.
Finalising Financing
Work with your mortgage broker to finalise your financing options. This is also the time to process your KiwiSaver first home withdrawal application so that it can arrive in time for settlement day.
Have a discussion with your mortgage broker to determine the steps in submitting a formal loan application, and meeting the conditions.
Legal Matters
A good mortgage broker should be able to introduce you to a reputable solicitor who can help with the legal requirements such as property searches, title transfer, and documentation.
Settlement Day
Settlement day is the date of your final purchase going through and completing. It typically takes place 4-6 weeks after the seller accepts your offer. On this day, your lawyer will exchange a couple of things with the seller’s lawyers such as:
- The remaining funds
- The transfer documents
- The property keys!
There will be the payment of the deposit and a lot of documents to sign and complete. Your solicitor or lawyer will help ensure this is a smooth and legal process.
Post-Purchase Things to Consider
Moving In
Be sure to book any moving truck and team you may need well in advance, so you can be sure to get the day and time you want. This is a great time to organise your utilities such as electricity and broadband. Make sure you contact your current providers to make sure you cancel your plans. Jump on Broadband Compare and Power Compare to find the best deals for your unique needs.
Maintain and Protect Property
Your new property is an investment that you’ll want to protect and preserve. It’s important to choose the right house insurance and make sure you purchase adequate coverage. You don’t want to lose your investment and have to dig into your pocket if there is a fire or flooding.
Need Help? Our Experts Offer FREE Advice
Here at Money Compare, have experts on hand to help you with any home loan or mortgage query. Simply request a free call back by clicking the button below and a fully qualified mortgage advisor will be in touch with you!
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