Ready to buy your first home but not sure where to start? Wondering what steps to take to find the right home?
Buying a first home is a big deal and it can feel a little scary if you’re not sure of the home buying process. As a first home buyer, it’s understandable you have questions, so before you head out to find your dream home, take a look at some of the things you’ll need to think about.
Finding the right home
Before you start house hunting, create a checklist of the things you’d ideally love in a first home. These are your “wants” and “needs” in a property and will help you refine your priorities and define your search.
Your first consideration is likely to be location. More than just choosing your favourite suburb though, location means thinking about:
- The property’s proximity to your family and friends
- Commute times to work, school or sports facilities
- Access to public transport or motorway on ramps
- The sort of community you’d be living amongst – things like parks, sports centres, shops, restaurants, libraries
- The surrounding homes and gardens
- Security in the area and crime rate
- Schools you may be in zone for
- Possible future developments for the area and how that could change its character
Practical considerations should also be included in your checklist. Things like:
- The number of bedrooms, bathrooms and living areas – also thinking ahead to a potential growing family
- Pet friendly with fencing or situated away from busy roads
- The property’s orientation and how much sunlight it gets
- Whether it’s ready to move in or will require more work to get it up to a liveable standard – you may be able to bag a bargain if you’re prepared to compromise on a fixer-upper
- Access to the property – a shared driveway or right of way
- Garage or off-street parking
- A garden or outdoor entertainment areas
- And any fixtures or fittings that may be important to you
Build vs. Buy
Deciding whether to build new or buy an existing home is a personal choice. Each option has its own set of pros and cons which we’ve outlined below, and it’s up to you to decide which one best fits your budget and lifestyle.
Building new means buying off the plans in a subdivision or development, or buying a section and then designing your own home to fit the section.
Pros:
- Design the home you want with features, layout and space you need
- Up-to-date building methods mean a warm, dry and energy efficient home
- Well-thought out layout
Cons:
- Costs can increase during the build if it’s not a fixed-priced contract
- Building takes time which means you may have to wait for your home to be built before moving in
Buying an existing home is a popular way to buy property in New Zealand, and may be a simpler process for first home buyers.
Pros:
- You can see what you’re buying and you know how much it will cost
- Suburbs with existing homes generally have established facilities like shops, restaurants, libraries and schools
- Older homes often have more character or quirks that some buyers love
- You can move in right away
Cons:
- Older homes sometimes have issues that require expensive maintenance
- Some older homes may be smaller or the layout may not be as practical as you’d like
Understanding property titles
In New Zealand, there are four main types of property ownership – freehold, leasehold, unit title and cross lease. Each type of ownership has its own set of rights, responsibilities and restrictions, essentially determining what you can and cannot do with the property.
Freehold
The most common property ownership is freehold – also called fee simple – and it means that you own the land and anything built on the land. However, there may be unregistered interests which restrict your use of the property. You can find out more about freehold here.
Leasehold
With a leasehold ownership title, you buy the exclusive rights to use a piece of land and the buildings on it for a set period of time, essentially paying rent to the owner of the land. When buying a house that is built on leasehold land, the terms of the lease will be set out and include the amount of rent you need to pay the freehold owner, how often the rent is reviewed, rates and other expenses. At the end of the lease term, you return the land and buildings to the freehold owner as outlined in the terms of your lease.
Unit title
Unit title ownership is most common in a building where there are multiple owners, like in an apartment block. Also called strata title or stratum estate, a unit title means you own your apartment or unit and any accessory units, including garages, car parks, private courtyards and storage areas. You also own an undivided share of the common property like lifts, laundries, lobby, driveways or gardens.
Becoming a unit title holder means you automatically become a member of its body corporate, responsible for making most day-to-day decisions about the building you share. Usually you are required to pay an annual fee to the body corporate which is used to pay for things like building insurance, management expenses, rubbish collection and cleaning of communal areas.
Cross lease
With a cross lease, you own a share of a freehold title in common with other cross leaseholders, and a leasehold interest in an area and building that you occupy. Cross lease ownership generally means that if you want to make any structural changes to the areas you own exclusively – like your home or garden – or to the shared areas, you need to get permission from the other cross lease owners. There may also be restrictions on what you can do with the property under the terms of the lease registered on your title.
You can find out what type of title will apply to any home you’re considering buying by checking the record of title – a legal document that contains a property’s legal description, details of ownership and rights or restrictions against it.
Ways to buy
There are a number of ways that sellers can sell property in New Zealand. Depending on the region and type of property, certain sales methods are more popular than others. As a first home buyer, it’s a good idea to research each method so that you fully understand how each of these will impact the way you buy property.
Buying at an auction means the property is being sold at a public sale to the highest bidder after the seller’s reserve price is met. It’s a fast-paced process that can feel incredibly daunting to first home buyers, so it’s worthwhile attending a few auctions before you bid to understand how property is sold at auction. All potential buyers need to register their interest to bid with the real estate agent, and need to complete their due diligence on the property prior to the auction, as a sale at an auction is unconditional.
When a property is being sold by tender, buyers have the option to make a confidential written offer to the agent before the deadline. Buyers can attach some conditions to the offer and sellers can accept an offer at any time. While there may be a price indication from the seller, buyers can choose to offer more or less than the amount indicated. Sellers can also choose to negotiate with potential buyers to achieve a better price or make changes to conditions.
A deadline sale or deadline private treaty is similar to a tender, but is less formal and allows more flexibility, particularly for the seller. A property is offered for sale with no fixed price over several weeks, and prospective buyers can submit their offers at any point by a specified deadline date and time.
Some sellers choose a private sale without a real estate agent, usually to save money on agent commission. In this type of sale, buyers would deal directly with the seller rather than through a real estate agent.
Costs to consider
Buying a first home is not always as clear cut as you’d hope, and there are often extra costs that aren’t covered by your mortgage. As a first home buyer, it’s important you know what these are and budget for them correctly so as not to slow down the home buying process.
Extra costs you may need to factor in include:
- Building inspection report: this is your safeguard and well worth the money spent. Building inspectors will check over the property and identify any potential issues. Cost is around $500 – $1000.
- LIM report: A council’s LIM report is a record of information on a property, and includes information about the rates, building consents and potential risks – erosion, contamination, drainage, landslips and flooding. Depending on the urgency and the council which issues it, the cost is generally between $250 and $400 for a LIM report.
- Conveyancing and legal fees – Lawyers and conveyancers deal with all the complicated legal paperwork involved with the home-buying process. Expect to pay anything between $1,000 and $3,500.
- Lenders mortgage insurance (LMI): home buyers with a deposit of less than 20% usually have to pay LMI, an insurance that protects the lender. The cost may depend on the value of your loan and the size of your deposit.
- Home insurance: your lender may require you to take out house insurance to cover the cost of your mortgage. Talk to Max Insurances about your insurances options.
- Moving costs, appliances or furniture not listed in the sale agreement, utility connection fees and rates are just some of the other costs you will need to include in your budget when buying your first home.
Get in touch with Max Mortgages
With a clearer idea of how the home buying process works, you’re ready to head out to find your dream home. For more advice for first home buyers about getting a first home loan or pre-approval, get in touch with the team at Max Mortgages. Simply request a call with one of our Mortgage Advisers to find out your options for buying a first home and one of our Mortgage Advisers will be in touch to discuss further.