Buying your first home

We want to own our own home. Where do we start? The first major hurdle on the path to home ownership is working out how big a deposit you’ll need and then savi...
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The best choice on a strict budget

Buying your first house is likely to be the biggest investment decision of your life. While the prospect of owning your own home can be exciting, it’s also hard to know where to begin. Let us help you get going: 

The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.
 

We want to own our own home. Where do we start?

The first major hurdle on the path to home ownership is working out how big a deposit you’ll need and then saving for it.  New Zealand banking regulations specify maximum percentage amounts that lenders can advance to home buyers, to reduce the risk of financial hardships and defaults if property prices fall.  Any difference between the property purchase price and the advance will be the deposit needed.

Whilst these percentages move around at times, you should aim to have a 15% to 20% minimum deposit to buy your own home. When buying a home for the first time, follow the helpful advice below:
  • Calculate how much you can realistically afford to borrow, and how any debt servicing requirements / rates will allow you to live reasonably comfortably.
  • Consult a financial advisor, friend, or family member who has bought property before. Seek out as much advice as possible.
  • Don’t financially over-commit when buying your first home. A bank or lending institution may be willing to lend you a larger amount, but you should not necessarily take the offer. Know your budget and stick to it.
  • Ensure that you have financial reserves to cover things like legal costs, moving in (and out costs), unexpected repairs and maintenance etc. 

We already own a property. Should we sell it before moving to a new home?

Finding a buyer for your current family home before purchasing a new one is usually recommended, for a number of reasons:
  • If you buy a new property first, you may find yourself in the position of having to make mortgage repayments on two houses at the same time (if your house does not sell in a timely fashion, or for the price you expect).  This might put you under unnecessary financial strain.
  • With your current property sold, you’ll know exactly how much money you’ll have available for your next property.  Being a cash buyer may give you better leverage on the pricing and terms of your new property.
Some financial advisors recommend that you never sell a property, but keep the first property as a rental, and use the income to help finance your next home.  This is only realistic to achieve if you have the sufficient financial means to do so.  Speak to a financial advisor or First National Real Estate agent for advice.

What are the key pieces of information I need when buying a first home?

There's a lot of information required when buying a first home, but luckily this information is available from a number of sources.  These sources include banks, insurance companies, real estate companies and financial advisors.

Regardless of whether you are buying a priced property, or a property being sold via auction or tender, it's important to know the following:
  • How much you can afford to borrow to buy your home
  • How large a home deposit you will need (see Question 1)
  • What other costs you will incur during the purchase of the property
  • How to go about making an offer on the property and some knowledge around the possible terms and conditions that can be included within the Sales and Purchase Agreement to give you adequate buying protection
Talk to a friendly First National Real Estate agent for further advice.

How much money can I borrow to buy a house?

It's important to know exactly how much money you can borrow before looking for your first home. This will indicate the prices of the properties you can afford.
  • For your first New Zealand home, you will typically need around 20% of the purchase price as a deposit.
     
  • A bank or mortgage broker can help you establish a realistic figure that you will be able to borrow based on the amount you have already saved and your expected future income.
     
  • You can also use an online mortgage calculator to see how different loan lengths and interest rates affect repayment amounts. Most New Zealand banks offer this functionality on their websites.
     
  • Once you've decided that you're comfortable with borrowing a certain amount, and you've found a lending organisation willing to lend to you, it is sensible to get your loan “pre-approved”. This allows you to make an offer on a house with more certainty that you’ll be able to borrow the funds required.

Can we make an offer on our next property, subject to the sale of our first?

Yes, you can make conditional offers on property, by including conditional purchase conditions into your New Zealand Property Sales and Purchase Agreement. These terms are reasonably common in New Zealand, although there are some downsides:
  • If your sale falls through, or takes longer than expected to settle, you may have to watch your dream home go to someone else.
  • If you’ve put in a conditional purchase offer, this may place pressure on you to sell faster, and for less money, than you might have otherwise sold for.
  • Some sellers, particularly in competitive markets, may be less willing to accept conditional offers. A lower offer from a competing buyer without any conditions may be more appealing because it offers a quicker sale and greater likelihood of the sale completing for the vendor.
  • If you haven’t sold your current property yet, you won’t have as much certainty about how much you can afford.  This can lead to you overextending financially, and it also limits your opportunities to bid successfully at auctions.

I’m planning to buy. What rules should I follow to ensure I make a good investment?

When you're buying real estate for investment purposes, the location is really important.  It's often said that you should buy the "worst house in the best street", rather than the "best house in the worst street", because good (or up and coming) housing areas tend to hold their value better than neighbourhoods on the decline.
Buying your home in a well-connected and popular location that has the potential for further improvement is a logical approach.  When buying, look for:
  • Houses that are close to shops, parks, good schools and transport hubs.
  • Houses or apartments that can be renovated or freshened up relatively cheaply. If buying in an apartment block, be aware of the standard of other apartments in the block, tenancy profiles (and likely noise), and amenities.
  • Real estate that is close to recreational facilities, sports clubs or other amenities that are likely to be popular with the general public.
  • Housing that is positioned for energy efficiency (north facing).
  • Homes that are well insulated, in the floors, walls and ceilings.
  • Real estate in suburbs which are likely to see significant development.  
Real Estate New Zealand provides a helpful property inspection checklist

Can my parents help me buy my first home?

Parents or other family members may be able to help you to secure a loan that would otherwise be out of your financial reach.  There are a variety of options available for parents who wish to help, which are listed below:
  • If your parents or other family members are willing, they may be able to use the equity in their own property to help you buy your first home sooner. In this instance, they would take out a mortgage on their own property (and pay necessary interest), to provide you with the cash to make up your deposit.
  • If you don’t have a large enough deposit to meet the lender’s criteria for a loan, but you do have the ability to service that loan, lenders may allow your immediate family members to use the equity in their own home as security for your mortgage. In this instance, your family members do not take out a loan themselves, but their property is used as security on the loan (and can be sold if you default).  This is more palatable to some parents / family members.
     
  • Another option is to take out a “Family Equity Loan”.  This arrangement makes yourself and your family member joint borrowers on the mortgage. Both are responsible for repayments.  The debt servicing calculations are based on the incomes and expenses of all borrowers.
With all of these options there are risks involved for your family member. If you can’t keep up with your mortgage repayments, your parents may be required to pay off the remainder of your loan or, even worse, sell off their own home to cover your debt. 

Can I use money in my KiwiSaver account to help buy a home?

If you’ve been in New Zealand's KiwiSaver superannuation scheme for at least three years, and are buying your first residential property (to live in), you may be eligible to withdraw money to put towards a home loan deposit. Where this is possible, you can withdraw your own contributions and your employer’s contributions, but not the $1000 New Zealand Government kick-start or any tax credits.

The KiwiSaver website provides further advice about this.

​Where can I get help?

At First National Real Estate, we're here to help you. Contact a First National Real Estate agent prior to moving into their area, and get chatting. They are well placed to give you general information and advice about your upcoming move.   They can also add you to our database of potential property buyers or renters, and can send you updates when properties that suit your needs and preferences become available.

What’s the difference between ‘Auction’ and ‘For Sale’?

The three most common ways to sell residential property in New Zealand are via private treaty sale, auction, and tender.

Private Treaty Sale
This is the most common method for selling a house in New Zealand. A property will be advertised “For Sale”, with a fixed asking price or explicitly stated price range.
  • Interested parties make offers and negotiate with the seller through the seller’s real estate agent
  • The agent may be negotiating with several parties at once and acts under the instruction of the seller
  • When you commence a negotiation, it’s important to be serious and respond quickly, fairly and decisively
Auction
An auction involves prospective buyers bidding against each other at the same time, with the property being sold to the highest bidder.  Home auctions are becoming increasingly popular in New Zealand, especially in popular cities like Auckland where there is limited house supply and a large number of buyers in the market.
  • The property will be advertised for a set period of time during which potential buyers must complete all of their enquiries (legal, building and any other relevant inspections), arrange their finance & be ready to bid
  • On the day of the auction, buyers (or their agents) put in competing bids until the highest bid is reached and no one is willing to bid any higher
  • Prior to the auction commencing, the seller will have informed the auctioneer of their ‘Reserve Price’. This is the minimum price they are willing to accept.
  • If someone makes a bid that is at or above the reserve price, the auctioneer will declare that the property is 'on the market' and the property will be sold to the highest bidder
  • If the reserve price has not been reached, the seller has the option to lower the reserve price and start the bidding again. Otherwise, the person who put in the highest bid (below the reserve price) will be given the first option to purchase the property at the reserve price
  • It the highest bidder opts not to purchase at the reserve price, the property is considered back on the market and any other buyers may negotiate with the seller (or their real estate agent)
  • If the property has been sold, the successful bidder must sign the Sale and Purchase agreement and pay a deposit (typically 10%) straight away.

Tender
A property sale by tender is a hybrid selling method. It involves a set tender period during which the seller will accept offers.
  • Each buyer submits a confidential offer in writing to the real estate agent.
  • At the end of the tender period (“tender day”) the seller will make their decision.
  • There is no reserve price and the seller is free to accept or reject any offer they wish to.
  • Often a deposit will need to be submitted along with the offer. This is refundable if the offer is rejected.
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