First Home Buyers Guide

So, you’ve decided it’s time to find your first home. Starting out can be challenging, because there’s a lot to know — but the Pointer team is here to guide you through the process. We want to be there to answer all your questions, not just when you buy, but the whole way through.

Figuring out your budget. Get pre-approved.

Having a budget in place makes looking for the perfect home much easier. Getting a pre-approval will show you how much a bank is willing to lend and makes getting a loan much easier once you’re ready to buy.

Your Pointer adviser will help you with the pre-approval process. If the pre-approval comes back with conditions, or is declined, we will talk you through your options going forwards.

The Deposit

The Reserve Bank of New Zealand has instituted rules that restrict how much of a property’s value a bank can lend you. Typically, banks need to see that you have 20% of the property’s value as a deposit, though in some situations you can buy with 10%. There are also a few options to help boost your savings:

  • KiwiSaver: if you’re buying your first home and have been contributing to KiwiSaver for more than three years, you may be eligible to withdraw some of your funds to help boost your deposit. Typically, you can withdraw everything except the $1,000 government kickstart contribution.
  • Home Start Grant: If you’ve been contributing to KiwiSaver for three years and meet the eligibility criteria (age, income, home ownership), then you could get a grant of up to $10,000 towards your deposit. Check out Housing New Zealand (https://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-homestart-grant/) for up to date eligibility criteria and the application process
  • Welcome Home Loan: Some lenders offer Welcome Home Loans which are underwritten by Housing New Zealand and allow lenders to offer loans at below 20% without the RBNZ restrictions. Check out their website for eligibility criteria (https://welcomehomeloan.co.nz/) and your Pointer adviser can help you through the application process
  • Cash gifts: While lenders would prefer to see that the majority of the deposit are funds that you have saved, there are options if you have access to non-genuine savings. So, if your parents have equity in their property, or maybe you have recently inherited funds, there are options available. Ask your Pointer adviser which lender would be most appropriate for your situation

Pointer Tip: When you’re building your deposit keep in mind that having a deposit of 20% or more is an advantage. A larger deposit gives you more options for lenders and typically lower interest rates. If you have less than a 20% deposit, lenders will often charge a Low Equity Margin, where they can increase interest rates by up to 2%. Additionally, the less you borrow, the less you have to repay. We can show you what your level of borrowing means for your long-term finances.

Income and expenditure

The other factor a lender will consider when offering a pre-approval is how much you earn, and how much of it you spend. Lenders need to prove that you can afford to repay the debt they are offering. Here are some of the sources of income that lenders can use:

  • Salary or wages: provided you’ve passed any trial periods, you can use a payslip or contract stating your annual income
  • Self-employed income: if you’re self employed or run your own business, a lender will want to see two years financial statements prepared by your accountant. However, under certain circumstances you can work around this, so get in touch with your Pointer adviser to check out your options
  • Commission, bonus or overtime: some lenders will allow for a portion of additional income provided that is regular and ongoing
  • Rental or boarder income: each lender has different requirements for proof of income and how much they will accept, ask us for options
  • If you are retired, not working or have supplemented income, can make applying for a loan more difficult – but some lenders will consider NZ Superannuation, WINZ Benefit, IRD Accommodation Supplement and Working for Families credits as income when assessing your loan application

Pointer Tip: If you have any concerns about being able to afford your mortgage repayments, then many of our clients have found this method helpful: ask your Pointer adviser what mortgage repayments might look like and try putting aside the difference between your current rent and your potential mortgage repayments. Not only do you get a feel for what it’s like to meet those repayments, but you’re also saving more towards your first home!

Starting the house hunt

With a pre-approval in hand, it’s time to start looking for the perfect property. It’s important to not only check out the property itself, but also the surrounding areas – does it have good transport options, local shops, and on street parking?

If you’re looking at apartments or units that are managed by a body corporate, then ask for the body corporate minutes, this will give you an idea of how the body corporate fees have increased over time and whether they have been keeping up with any necessary maintenance work.  There are often additional rules and regulations that you should talk to your solicitor about before you buy.

Getting a LIM report means you can check that any work on the property was properly consented, and a builder can make sure the structure of the house is in good condition. So, make sure you include these in your budget if you want one.

Pointer Tip: Check in with your Pointer adviser when you find a property that you’re interested in, as they can send you a Comparative Market Analysis, showing recent sales in the area, similar properties for sale as well as details about the neighbourhood. It’s a good way to get a feel for what a property might sell for.

Making a conditional offer

When you’ve found the perfect property within your budget and it meets all your requirements and checks, then it’s time to make a conditional offer. A conditional offer means that you have time to do any last checks – often with your lender, then if those checks fall through, you don’t have to purchase the property. A solicitor will help you with the wording of your conditional offer.

You’ll need to send us your Sale & Purchase agreement, so we can check the property with the lender. Each lender will have slightly different requirements on what types of properties they will lend on, for example most lenders will increase the required deposit if an apartment is less than 45m².

Pointer Tip: If a property is going to auction, then the winner of the auction is legally committed to purchase the property and will need to pay the deposit that day – this can cause issues if KiwiSaver makes up a large portion of your deposit. Make sure you ask your Pointer adviser about your finance options.

Structuring your home loan

Once the lender has checked your Sale & Purchase agreement, provided everything is good to go, you’ll get an unconditional loan approval, so you can start planning to move in.

We’ll work with you to structure your loan to best suit your specific situation. It’s important to get this right, because it will impact how long it takes to repay your loan, and how much interest you pay along the way.

Things we consider:

  • Choice of lender: we’ll help you pick the lender that offers competitive rates, cash contribution, and loan products that suit your debt repayment strategy
  • Fixed, floating, or revolving: each loan product has different advantages and disadvantages, we’ll help you decide how much debt to fix and for how long, and what other loans might help you repay debt faster – reducing how much interest you pay

Pointer Tip: Our software can model your debt strategy over the long term and show you when you could be debt free, or maybe the perfect time to consider a rental. We’re here for the long term. As your life-stage and priorities change, we make sure your debt strategy changes with you. The idea is you can call us any time. We want you to use us as a resource.

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