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First Time Home Buyers

When you’re a first home buyer, the financials can be difficult to get your head around. This can be the area first home buyers are most unfamiliar with. Terms specific to property investment are ones a first time home buyer is unlikely to come across unless already in the process. Exploring your financial situation and the jargon beforehand can make the difference between a successful and a stressful purchase.

As a first house buyer, these are some questions that may have crossed your mind. Questions are a great start and hopefully you’ll have a lot more as you go along. Here is some background information for first home buyers.

What can you afford?

Your savings, revenues of income and the amount you’re entitled to borrow will determine your deposit. This will affect the price range of houses most first time home buyers can afford.

Most banks will have online calculators you can use to gauge how much you are eligible to borrow. First home buyers in NZ can use these to help decide which bank meets your needs best. Keep in mind that how much you borrow will influence your repayments. Account for on going costs as well such as home maintenance.

How much deposit do you need?

Depending on your S&P Agreement and whether you buy in an auction or private sale, you will need to save 5-20% of the house price for a deposit.

On top of your deposit, you will need to save for additional costs. E.g. Lawyer’s fees, building inspections, a builder’s report, LIM report, registered valuations. You’ll want to save a minimum of $2000 to cover these.

First time home buyers in NZ may be eligible for a government grant through KiwiSaver or a Welcome Home Loan. This can contribute to your deposit.

Why get pre-approval?

Pre-approval allows for a faster borrowing process once you find your first time buyers home. It means the bank has agreed to lend you a certain amount of money. As a home ‘first buyer’ it neither locks you to a specific bank or a loan. This can be a bargaining tool and looks good when negotiating with sellers as your finance has already been (conditionally) approved.

Lender’s Mortgage Insurance (LMI)

As a first home buyer in NZ, a charge you may be unaware of is the LMI. You may be charged an LMI if your deposit is less than 20%. This is a one off payment banks may charge based on the risk involved with the loan. Though you can include this as part of your loan, you will be paying interest on it.  Waiting to save a larger deposit will save you money in the long run.

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