First Home Buyer Mortgage
Everything you want to know about a First Home Buyer Mortgage
Saving enough to be eligible for a mortgage for your first home in New Zealand takes lots of careful planning and some serious budgeting to make the savings required for the deposit. The tips in this article are designed for helping first time buyers with their plans of buying a house, the mortgage, insurance, legal fees and those other little hidden extras that add another few thousand dollars onto the total needed to get you on the housing ladder.
Saving your Deposit for a First Home
The first step you need when saving for a deposit for your first house is to set yourself a savings goal or target. Most lenders in New Zealand require you to have a minimum deposit of at least 20% of the total you are hoping to borrow for your first mortgage. If you are planning on buying a house that costs $500,000 you will need at least $100,000 as your deposit. The good news is there are some exceptions to this, some loan schemes such as the Welcome Home Loan which is set up for first time buyers only require a deposit of 10%.
The bigger the deposit you pay the less you will have to pay in interest charges, similarly loans that are in excess of 80% of the total value of a property tend to come with higher charges due to the increased risk to the lender. These charges can vary greatly, some will be charged through a low equity fee while others will find they have to pay higher interest rates to cover the potential risks involved.
Our expertise in this area has lead to recent success with 90% home loans with no low equity fee and still achieving discounted rates. It all comes down to how well the proposal is presented and supported by relevant documents. Also, the volume of business we supply the banks gives us greater negotiating power than an individual going direct to their bank.
One effective way to save is to save the difference of what you are currently paying in rent and what you would expect to pay monthly in mortgage payments. If you begin putting that into your regular savings the amount can increase very quickly.
Help from the Government
If you have a 10% deposit you may be in a position to borrow a greater amount under the New Zealand government’s Welcome Home Loan Scheme. In addition, If you are in the KiwiSaver scheme and have been contributing into the scheme for at least a period of three years you may be eligible to receive a grant under the KiwiSaver Home Start scheme. Under this scheme the government could give you up to $5,000 towards the price of an older or existing home or up to $10,000 towards the cost of a newly built house or the land on which to build one on. If a couple are buying together they can both apply for grants for first home buyer mortgages which can be up to $20,000 if two people have been jointly saving for five years.
Considerations when choosing what and where to Buy
Your first home may well not be your dream home but it could easily be your first affordable step getting you onto the property ladder. There is little point in saving for your first house and then not being able to meet the mortgage payments, sometimes the best option is to take a house in need of some minor repairs especially if you are good at doing DIY. You should check real estate websites to see how much properties are selling for in any given area. Some banks will not give such good rates on apartments or townhouses. You may want to do some research to discover how much the banks will lend you on these types of properties.
We have access to property information and can run a free report to give selected clients an indication of current market value. This is very useful when considering a purchase or negotiating on price.
If you are buying a property with future investment potential it is important to consider its potential resale value. You should consider factors such as-is the property close to public transport routes and are there shops and schools within walking distance.
Getting your First Home Buyer Mortgage
Your first mortgage or home loan is likely to be the greatest financial commitment you will ever have to make. When buying a house you will probably look at dozens of properties before deciding on one you like. You should give similar consideration when it is time to choose which mortgage is the best one for you. Over time these careful considerations could save you thousands of dollars over the length of your mortgage payments.
There are lots of different types of mortgages available they each have their own degree of flexibility, fees and interest rates. These are all factors to consider when calculating the affects of costs and how long it will take to pay the mortgage off. You can shop around for a mortgage yourself but why not use the (free) services of an approved mortgage broker.
An experienced mortgage broker will get the best home loan deal for you. They are not tied to any particular bank or lending company so they will review all that is being offered and work out which one is the best to achieve your goals – which may include:
- Getting the best possible interest rates to reduce your repayments
- Paying off the loan as quickly as possible
- Using a home loan to finance other purchases
- Making sure you get enough money for what you want to purchase. Often one bank’s max borrowing level is not even close to what can be offered at another bank. This can mean the difference between a sale settling or not
Read more on the services and advantages of using a mortgage broker in this article: ‘Best mortgage broker Auckland’
Lawyers Fees, Builders Reports and LIM’s
Before you can complete any sales agreement or mortgage paperwork your mortgage broker or bank will need everything to be carefully checked by a lawyer. Lawyers are also responsible for the transferring of all the legal paperwork to your broker or bank once the house sale is completed for you to get the keys. Lawyers’ fees can vary greatly so it is best to shop around for the best deal. Better yet, talk to us as our clients get preferential treatment with our preferred law firms.
A builders report is used to ensure the building is sound and there are no major defects in the structure of the building. An experienced eye will find things that most of us would not see and could potentially save thousands of dollars in repairs should these damages go unseen. Banks can be selective about which inspections are acceptable so check with us first.
A LIM or Land Information Memorandum will identify any problems with the land that the property sits on. This could be drainage issues or a risk of landslips. They can be ordered through your local council or your property lawyer can arrange it for you.
Additional Costs
When you buy your new home, in addition to the deposit there are several other costs that are needed to be paid, such as;
Moving in costs;
- The cost of moving services or hiring a truck
- Fees for connecting the phone, electricity, water and internet
- Any decorating or renovation work that needs to be completed before you can move in
- Legal fees and builders reports to be paid
Ongoing costs
In addition to having mortgage repayments you will also have to budget for insurance, rates and other costs such as utility bills.
The good news is your mortgage adviser can negotiate a great cash contribution that usually covers these costs and more.
Conclusion
Securing a mortgage and getting yourself onto the property ladder is a big step and not one to be taken lightly. You will have to do your homework and thoroughly research what property is the right one for you. The best advice is to use the services of a mortgage broker. They are the professionals in securing mortgages and know where the best deals can be found, which is constantly changing depending on bank market share and lending policy.
If you want to read more about the role of a mortgage broker, click here.
