09 May A Complete Guide To Buying Your First Home
Before you embark on your first home buyer journey, there are a few important steps you’ll need to take – from saving a deposit and arranging mortgage pre-approval, through to finding and buying your property. To help you understand each of the steps you’ll take, and what’s required of you at each step, we’ve created this complete guide to buying your first home.
1. Getting your finances ready
Saving a deposit is an important first step for all first home buyers. It’s also the biggest stumbling block preventing many first home buyers from getting into the property market. That’s because lenders generally require you to hold at least 20 per cent of the property purchase price as a deposit. And in a heated property market where house prices rise faster than borrowers can save, that makes things really complicated.
The good news is, there are options available to help first home buyers save a deposit. KiwiSaver Withdrawal may allow you to make a one-off withdrawal of your KiwiSaver savings (except $1,000 which must remain in your KiwiSaver account), provided you’ve been a KiwiSaver member for at least three years. If eligible for the First Home Grant, you could get up to $5,000 towards buying an existing home, or up to $10,000 towards buying a new home or land to build a new home on. And those eligible for the First Home Loan scheme could buy a home with just 5 per cent deposit. Other options include the Bank of Mum & Dad which has become more and more common over the last property cycle. In addition, players have come into the market which offer co-ownership opportunities. These are a little more complicated so we recommend you talk to an experienced & qualified Mortgage Adviser, like those at Max Mortgages.
Once you’ve saved a deposit, apply for a mortgage pre-approval, a conditional agreement from a lender confirming how much they’re prepared to lend to you, provided you meet the conditions of the agreement. Having a mortgage pre-approval before you start house hunting means you can shop with confidence, knowing you can secure finance up to a specified amount. It also allows you to bid at a property auction. And with a pre-approval, you can move quickly when you find the house you want to buy.
Often some lenders will only consider “live deals” (i.e., a property under contract). But a good Mortgage Adviser will be there to help during this process to help align the contract discussions with finance requirements.
2. Finding the right home
With a mortgage pre-approval in place, you’re now ready to start house hunting. But before you head out to open homes, take a minute to understand the types of ownership in New Zealand, as each one of these means a different set of rights, responsibilities and restrictions for the owner.
- Freehold – also known as fee simple – is the most common type of home ownership in New Zealand. It means you own the land and anything built on it unless there are registered or unregistered interests.
- Leasehold means someone else owns the land and you buy an exclusive right to possess the land and any buildings on it for a specified period of time, according to the terms of the lease. At the end of the lease term, you return the land and the buildings to the freehold owner.
- Unit title is most common in building developments where there are multiple owners. With this type of ownership you automatically become a member of the body corporate, consisting of all unit owners who act as a group and make the day-to-day decisions about the property.
- A cross lease means you own a share of the freehold title in common with other cross leaseholders. Any changes you make to the footprint of the area you are entitled to use exclusively or to the shared areas must be agreed upon by all or a majority of the owners.
Be sure to thoroughly research the details of any property you are considering making an offer on, and understand how the different methods of sale will impact on you making an offer. Finding the right property can take time, and often your first home isn’t your dream home. But it can be a first step in the right direction, giving you entry into the property market and options for future house purchases.
3. Making an offer
When you’re ready to move forward, make an offer on a home. Once the seller accepts your offer, and the sale and purchase agreement is signed, you have a short time to work through any conditions specified in the offer. Be prepared to provide your lender with additional details about the property you intend to purchase. Your Mortgage Adviser will liaise with you and your lender to confirm your finances and ensure you understand the finance conditions of offer.
Have your lawyer review the record of title and the LIM report (Land Information Memorandum), to highlight any potential hazards or future issues with the property. And arrange for a property inspector or building inspector to inspect the property and report back. As part of your home loan approval, you will need to have house insurance in place before settlement date, so get in touch with a Max Insurances Adviser to talk about your house insurance requirements.
4. Going unconditional
When all the conditions have been met, the sale becomes unconditional. Up until this time, you and the seller can withdraw from the sale if any of the conditions specified in the sale and purchase agreement are not met on time. Be prepared to pay the purchase deposit agreed in the sale and purchase agreement once the sale becomes unconditional. Again, if you don’t have the cash sitting in your account for your deposit, Mortgages Advisers will be able to work through options for you.
5. Settlement and move-in day
Congratulations, you now own a home! But before you move in, there are a few things you need to take care of.
- Arrange a pre-settlement inspection: this is your last chance to walk through the property and check that the property and chattels are in order. If you have any issues or concerns, bring these to the seller’s attention.
- Confirm with your lawyer that your home loan is in order.
- House insurance is usually a condition of property finance so check that your house insurance comes into effect from the day you take possession.
- Book a moving company if you’re using one and plan for your moving day.
A guide for first home buyers
Set yourself up for success in your first home buyer journey, by reaching out to professionals such as Mortgage Advisers from Max Mortgages who specialise in helping Kiwis arrange home loans NZ wide, and can guide you and help you understand what’s required of you throughout the home buying process. Get in touch with Max Mortgages today if you have questions about buying a first home.
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