Us Kiwis love property and most of us have dreamt of owning our own little piece of Aotearoa at some point. Whether that’s a section of land in the country, a family home in the suburbs, a bach at the beach, or a stylish apartment in the city, buying a first home is a big part of our lives. It’s also a big commitment financially, so before you buy your first home, here are three things to do first.
1. Understand how to buy
A small percentage of homes are sold privately in New Zealand, while the majority are usually sold through a licensed real estate agent paid for by the seller. The seller, in consultation with the real estate agent, decides on the method of sale, either by auction, tender, deadline sale, by negotiation or with an advertised price.
To make an offer on a property being sold by negotiation, advertised price, or deadline sale, the buyer completes a sale and purchase agreement. This is a legal document that sets out how much the buyer is prepared to pay for the property and any conditions of the offer, such as a finance condition, or a condition for a building inspection. Both the seller and the buyer sign the agreement and the agreement becomes unconditional once all conditions are met.
Selling by auction is a popular method of sale in many regions in New Zealand. It’s a fast-paced public sale with bidders each vying for the highest bid. The property is sold to the buyer with the highest bid once the seller’s reserve price is met. Properties sold at auctions are unconditional which means buyers must have pre-approved finance and should have completed their due diligence on the property before bidding.
2. Present a solid case
When it comes to applying for finance, first impressions do count! That’s why it’s so important to present the best application possible. Lenders will want to see evidence that you can afford your mortgage repayments. So not only is it important to show proof of income, it’s also vital you prove you can afford to pay what you say you can.
Whether you’re still living at home or renting, to demonstrate you can repay the equivalent cost of a mortgage, it’s a good idea to set aside the extra cost in a separate savings account. So, if your rent is currently $300 a week, and your new mortgage is likely to be $500 a week, saving the difference of $200 a week will go some way to showing your lender your ability to repay a mortgage at that level.
Here are some other ways to present a solid case when applying for finance:
- Check your credit score by requesting a credit report from any one of the three credit reporting bureaus in New Zealand. Check for any outstanding debt or black marks that could impact your home loan application, and fix these.
- Find out if you’re eligible for Government first home subsidies or KiwiSaver Withdrawal, and make sure you have enough money saved for a deposit.
- Treat your everyday bank account with care by avoiding overspending, dishonoured payments or an overdraft.
- Avoid buying big ticket items – like a new car or a boat – for the meantime, and don’t rack up any more debt.
- Banks want to proof of a steady income and employment history so avoid changing jobs too often.
3. Get the right team on your side
As with most things in life, having the right team on your side can make all the difference. A crucial first step in buying your first home is meeting with a mortgage adviser to discuss your current financial situation and your borrowing capacity. Getting pre-approved finance is a good idea too as it will help you stick to your budget and buy within your means.
Once you find a property and make an offer, engage a solicitor to help with the necessary paperwork. A property inspector or a builder inspector is invaluable if you’ve included a building inspection condition in the sale and purchase agreement, to help identify potential issues or areas of concern.
If you’re ready to take your first step onto the property ladder, but you’re not quite sure where to start, contact a Mortgage Express branded mortgage adviser today to help you plan how to buy your first home.