Buying a home today seems to be an insurmountable challenge. We’re constantly told that banks have cut lending, credit rules have tightened, and property prices have spiralled out of control. While these factors are indisputably true, there is still hope. If you’re a first home buyer looking to get into the property market, there are a few important steps you need to take in order to get mortgage ready.
Cut back on unnecessary spending
It goes without saying that lenders want to see evidence of good saving habits, so your first step is to cut back on any unnecessary spending and start plugging away at your savings account. Even the smallest amount – that twice weekly coffee – can make a difference.
And don’t forget your KiwiSaver: it’s already helped many first home buyers into their own home and could be the deposit you need to get into yours. Talk to your mortgage adviser about accessing your KiwiSaver for a first home and find out if you qualify for a HomeStart Grant.
Pretend you have a mortgage
It’s worthwhile pretending you already have a mortgage and calculating how much extra you’d be paying for mortgage repayments, insurance and rates compared to your current rent. If you can set aside the difference between your current rent and what you would be paying for a mortgage, you’ll present a far better picture to your lender when it comes time to apply for a loan.
Do the maths
When calculating how big a mortgage you could potentially afford, be sure to factor in a bit of a buffer should interest rates rise. Yes, interest rates are at a record low, but they’re not likely to stay there. Banks will use a “test rate” to calculate how much you can afford to borrow – typically 1 – 2 per cent higher than current interest rates – so use a similar rate in your own calculations.
Understand the property market
If you don’t have experience in the property market, take the time to do your homework. Read up on the latest news around mortgages, lending, the Reserve Bank rules, and first home buyer assistance from Government.
Check property listings on Real Estate websites and follow the trends: how much are properties selling for? How long are they taking to sell? Which areas are more popular, and hence more expensive? There’s a fair bit of research you can do on your own to gain a better understanding of the current market.
Work with an expert
There’s a good reason so many home buyers choose to work with a mortgage adviser: navigating the property market, understanding lending requirements and mortgage options is tricky business. Working with a mortgage expert who understands the rules and has relationships with various lenders can make a difference.
If you’d like to talk to one of our mortgage advisers about your options for buying a home, contact us today and we’ll put you in touch with someone in your area.
Resources:
http://penguin.co.nz/books/buyer-beware-9780143770398/article/1241-tips-being-mortgage-ready
http://www.thefirsthomebuyersclub.co.nz/pre-approval/
https://sorted.org.nz/guides/buying-a-first-home
Disclaimer:
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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