We are seeing an increase in the number of enquiries from those who no longer wish to rent, and would prefer to spend their hard earned income on their own mortgage to purchase their first home. For many the thought of having to go to their bank to ask for a home loan is a daunting task and can often lead to a fear of rejection stopping them from even making the initial enquiry. Fortunately, we are here to let you know that it doesn’t have to be such a stressful exercise if you speak to an adviser who can help you with your application, provide you help and support as you start looking for your dream home, and can continue to help you manage your debt all the while there is a need for it.
But what are the first steps and the main things to know when setting out on your journey to home ownership for the first time?
DEPOSIT/SAVINGS- Obviously much has been made of the Reserve Bank’s requirement of a 20% deposit towards a property purchase. However, there are now mainstream lenders prepared to look at smaller deposits for strong deals and for some first home buyers the option of Welcome Home Loans which only require 10% deposit or gifts from family members will make the dream of own home ownership a reality. Also, it should be remembered that if you have been a member of a Kiwisaver scheme for at least 3 years, then you may be able to access your contributions, and may even be entitled to an additional First Home Buyers subsidy which may provide you with $1000 for each year you have been continually paying into the scheme. A key thing here is that the payments need to be continuous, so if you leave a job it would pay to try and keep your Kiwisaver contributions going (even at a reduced level) so that you can retain your eligibility for additional funds.
SALE & PURCHASE CONTRACT- Whenever you buy a property you will need to sign a sale & purchase contract. This is a legally binding document that states among other things:-
The purchase price of the property, the date that you will take ownership of the property, what deposit you need to pay and any other conditions which you may wish to put onto the contract. If you are buying through a registered Real Estate firm, the agent should be able to guide you through the process, with recommendations that you request a LIM report from the council and obtain a building inspection. It is also advisable to have the contract checked by a lawyer prior to your signing, so that they can pick up on any items that may need to be addressed before you commit to the purchase.
It is also a good idea to make any purchase “subject to finance”, so that your adviser can make sure that the bank is happy with the location and type of property to be purchased, as lenders requirements and level of approval can vary depending on what or where you are purchasing.
ADDITIONAL EXPENSES- Finally, it should be noted that there will be additional costs involved in your first home purchase. If you are purchasing with less than a 20% deposit or buying privately (i.e. without Real Estate agents involvement e.g. Trade Me or from a family member), you will require a Registered Valuation to determine the market value of the property. You will need to be mindful, that banks will base their loan lending decision on whatever is the lower figure of a registered valuation or purchase price, Also, unless you have additional funds above the 20% deposit, you won’t be able to obtain additional money to clear short term debts or pay for improvements to your new home, so while a “doer-upper” may seem like a bargain, it may not be an option for you without sufficient equity.
Other costs will be for the lawyer who will need to go through loan documents with you as well as registering the mortgage in your name ahead of you taking ownership. There will also be a need to obtain Insurance on your property, (and yourself!), and your adviser will be able to help you with this as part of the application process. You may also need to pay any outstanding rates payments on the property you are purchasing, and it is a good idea to get your solicitor to establish what will need to be paid ahead of settlement.
Purchasing your first home can sometimes seem like a rollercoaster ride with high excitement and moments of nervous waiting, but with the right adviser working with you to help you prepare and to be there to advise and support you along the way, your first home purchase could be one of the best experiences you ever have!
