07 Jul Rent Or Buy? Top Reasons To Buy Your First Home
For first home buyers, transitioning from renting to owning a home can feel overwhelming, while getting onto the property ladder in New Zealand is not without its challenges. It’s helpful to know the top reasons to buy a first home instead of continuing to rent, and the financial assistance that is available to first home buyers.
1. A first home buyer advantage
Getting onto the property ladder is challenging, with one of the biggest hurdles being saving a large enough deposit. Often lenders require at least 20 per cent of the purchase price, but it’s helpful to know that the deposit can come from a number of sources. As well as using your own savings or getting help from family or friends, eligible first home buyers can access Government assistance to help with the deposit when buying a first home.
- KiwiSaver First Home Withdrawal: As a first home buyer and KiwiSaver member for three years or more, you may be entitled to withdraw some of your KiwiSaver funds to use as a deposit for a first home.
- First Home Grant: Eligible first home buyers may apply for the First Home Grant which provides $1,000 for each of the 3 or more years of contribution to KiwiSaver, up to a maximum of $5,000 per person to be used to buy an existing or older home, or $2,000 for each of the 3 or more years of contribution to KiwiSaver, up to a maximum of $10,000 per person to be used to buy a new home, land to build a new home, or a home bought off the plan.
- Personal Loan to top up deposit: Sometimes first home buyers can have good incomes, but just can’t quite save enough or fast enough to obtain the required deposit. In these cases, our Personal Lending Advisers may be able to help through securing a personal loan to add to the deposit through our personal loan service at Max Loans.
- First Home Loan: Under the First Home Loan, first home buyers could buy a first home with just 5 per cent deposit.
2. Long-term cost benefits
The current rental shortage across many regions in New Zealand is driving demand for housing and pushing up rental prices. It’s impossible to predict just how high long-term rental costs could go. While rising interest rates may have increased the current cost of mortgage repayments above that of rents, it would be inaccurate to compare the cost of renting with buying a home in New Zealand without taking into consideration the future financial benefits of owning a property.
The outlook for interest rates remains favourable with predictions that they’re likely to stabilise at more affordable levels in the near future. Once the market recovers, property prices may begin rising again and first home buyers who waited may regret not taking advantage of lower property prices at this time.
3. Stability and security
When renting a home, tenants are often at the mercy of their landlord, experiencing high levels of stress due to the uncertainty of their housing situation. They have little or no say over the decision making of their living arrangements, with housing availability and a shortage of rentals forcing many tenants into paying far more than they used to pay.
Owning a home can provide a sense of stability and belonging, by removing the constant worry and fear of having to move each time a tenancy ends or the rent is increased. Through a cautious and prudent approach to property investment, owning a home can lead to financial security in the future as an owned home can be used to leverage additional financing and grow an investment for retirement.
4. A solid investment
Unlike paying rent, which effectively goes into paying someone else’s mortgage, each mortgage repayment you make not only goes into repaying your own mortgage, but it also builds property equity. Equity, the difference between how much your home is worth and the amount you owe the lender, can be used as collateral for future loans to buy an investment property, a holiday home, or pay for renovations to your existing home.
Owning a home offers the opportunity to generate extra income by renting out a spare room, running an Airbnb business, hosting a homestay, operating a home-based business, or renting out unused storage or garage space for extra cash, most of which are not possible in a rental or without a landlord’s permission.
As property generally increases in value over time, property ownership offers retirees an opportunity to cash out their investment by selling their home to downsize to something smaller in retirement.
5. A home to make your own
Owning a home offers the freedom to customise and make changes that improve the property, without the approval of a landlord. Homeowners choosing to replace existing features and fittings with eco-friendly, sustainable alternatives not only benefit from improved living spaces within the home – warmer, drier homes – but also enjoy the cost saving benefits these improvements bring.
Are you ready to buy a first home?
Deciding whether or not to buy a home in New Zealand is a decision that requires careful consideration of financial situation, goals and needs. It’s important to carefully weigh up the pros and cons of buying a home versus renting before reaching a decision. If you’re ready to own your first home, contact a Max Mortgages Adviser today to get financial advice on NZ home loans and start your journey towards owning your first home.
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