by Roshan Manamperi ……………
First home may not be your Dream Home…
We all have financial goals that we want to achieve. Buying the first home may be the biggest financial goal anyone can have. We all know that if we are not financially capable of purchasing our house with our own money, then inevitably, we have to seek financial assistance from a financial institution.
Plan / budget your Finance
Oh, it is not an easy process and therefore, you have to plan / budget your finances before purchasing your house; you need to think about your earning, expenses, insurance, rates and legal fees etc prior to your application.
Build up a Deposit
The first thing that you need to do is to build up a deposit. With the current reserve bank policy, financial institutions are restricted to grant only 80% on purchase price (banks may use discretion to reduce the deposit to less than 20%). Nevertheless, you will require a deposit of at least 20% of the amount you plan to borrow. For example, if you are buying a house worth $500,000 you will need a deposit of at least $100,000. The bigger the deposit, the lesser you will pay in interest over the long term. It may be the biggest challenge you may face but if you are capable of saving the required amount, (while cutting down on non-essentials for a while), the satisfaction of moving in to your first home will be worth it. If you are a Kiwisaver member, you may be able to put some of your savings towards your first home. The amount you can get from Kiwisaver can be found out from Housing New Zealand or your Kiwisaver provider.
Affordable First Step
Your first home may not be your dream home. However, it could be an affordable first step towards your dream home. Do some research. You may search properties from newspapers, real estate websites to find out how much properties are worth in different areas. Before you purchase an apartment, town house or a terraced house, check whether your bank will lend on these types of properties – not all banks will. If you are buying a property as an investment, and/or as a place to live, think about rental potential. Rental property is considered a higher risk by the banks and they may not lend you as much as they would for a property you are going to live in.
Choosing your Mortgage and the Property
Your first mortgage, or home loan, will probably be the biggest financial commitment you will ever make. It is a good idea to be just as careful when choosing your mortgage as well as the property, because over time, your repayments could add up to a lot more than the cost of the home. There are many types of mortgages, each with its own interest rate, fees and degree of flexibility. All these things affect how much the loan costs you and what it will be when you pay back. You can shop around for a mortgage yourself or talk to your friends and families who are having a good knowledge of the process.
Buying it through a Real Estate Agent
There are various ways to buy your home. Most popular and guaranteed way is buying it through a real estate agent. This can be done through negotiation or an auction. Before you bid your offer on auction, ensure that you have the approval for finances, since the auction deal is unconditional. A private treaty also needs bank approval before you put your offer but bank may ask for registered valuation done by an independent valuer or a panel of bank valuers. Never accept a valuation report from the vendors as it may not be accepted by the bank as a proof of the value of the property.
Paperwork Arrangements
Before signing any sale agreement or mortgage, you will need to get the services of a lawyer to look into the paperwork arrangements. You will also need a lawyer to handle the ‘convincing,’ once you bought your house.
Mortgage Repayment
Mortgage repayment installments are not the only thing you will need to budget for as a homeowner. Make sure you include insurance, rates and other ongoing costs in your calculations.
insurance!
Your home may be your biggest asset and hence, and as such, it is worth to protect it from the unexpected. Here comes insurance! House and contents insurance, mortgage repayment insurance and even a life insurance can help. Remember that mortgage protection insurance does not cover you; it covers only the bank in the event you defaulted on the loan.
You Become a Ratepayer
When you buy your first home, you become a ratepayer. Rates, covering various council charges, can be up to thousands of dollars a year. Ask the real estate agent what the property’s rates are before you make an offer, so you know if you can afford them. You may also be able to search for property’s rates on the local council website.
If you are buying an apartment or townhouse
If you are buying an apartment or townhouse, that’s part of an accommodation complex and has ‘unit title’, you will probably need to pay ‘body corporate’ fees. These cover things like insurance and maintenance of shared areas. Get your lawyer to go over these details carefully.
Roshan Manamperi
Premium Manager | Premium Banking Centre | East Auckland | 