Buying a home is daunting and a test of endurance. You’re also playing with a lot of money which is a big financial commitment. As I started to educate myself about buying a home, I found there were a lot of decisions to be made…big and small and I didn’t know where to begin. My biggest question when I chose to get into the New Zealand property market was, “Where do I start?” I’d made the little sacrifices along the way and saved up for the big 20% deposit on my first home. Now what?!?
I was already on TradeMe looking at properties and loving it. That was the fun part! But it was time to get serious. I already knew the size of deposit that I wanted to put down…say $50,000 for instance. That allows for a $250,000 house and a $200,000 loan. Then I went online and used one of the many online mortgage calculators to check how much my repayments would be. With these calculators, you can adjust the loan term, interest rate, and payment frequency to find a repayment that you can afford on your income. See the image below for an example.
This is good information to know because the lenders will ask this. Plus, after looking at TradeMe, if you aren’t satisfied with the house $250,000 will get you then it’s time to keep saving...as long as you can afford the larger repayment, of course!
I knew that I had enough of a deposit to get me in the property market and now it was time to talk to a lender. But how do you find a suitable lender?
Finding A Lender
First you need to choose whether to use a broker, who speaks to the lenders on your behalf, or, if you’re like me, talk to the lenders yourself. There's are websites that show the current interest rates offered at various banks/lenders. Based on the lenders I saw and general knowledge of their credibility, I made a short list and started arranging pre-approval with my favourites.
I discovered that it is wise to have a letter of pre-approval sorted while looking for a house. It is a powerful (and I believe a prudent) feeling knowing that you have the banks financial backing…plus the selling agent will take you more seriously if they know you’ve already arranged finance!
Generally, if the lender is not your main bank, they will need 3 months of bank statements, confirmation of income/employment, your current debts/expenses, and number of dependants. Have this information on hand when you talk to them to get your pre-approval started right away!
While arranging for my mortgage pre-approval, I also found out that I should be searching for a lawyer to oversee the conveyancing. Initially, the lawyer will read over the offer before submitting it to the seller. Secondly, they will assist with the closing. The New Zealand Law Society has put together a thorough list of property lawyers. I also asked for referrals from my friends.
The Search Is On
So now with a solicitor waiting for me to find my first home and a pre-approval letter from a lender or two stating how much they are willing to lend, let the search begin. You’ll now find me scouring the slums of Christchurch, New Zealand confidently looking for my first home!
What are your thoughts for the first time home buyer in New Zealand?
What else would you recommend?