5 Tips for First Home Buyers

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1. Find out if you’re eligible for First Home Loan

In NZ you normally only get the best interest rates if you have 20% deposit. With First Home Loan you can get the best rates even if you only have 5% deposit, which could save you several thousand dollars in interest over the first few years of your loan. The main criteria for First Home Loan is that you are a first home buyer (or in the same position as one), and have total household income less than $150,000/year (or $90,000/year if you’re single with no kids). There are some other restrictions so talk to your Mortgage Advisor about whether you qualify and if you can get a preapproval.

2. Get a Preapproval

When you buy a property the bank is approving 2 things – you as a customer, and the property you’re buying. A preapproval means getting the bank to approve you as a customer first, which includes how much they will lend to you. You can then get approval for a specific property later on.

This has a few key advantages:

• Your budget is confirmed, so you can save time looking at properties in your price range

• You’ve done the hardest part first, which will save you time later when you’re ready to make an offer

• This means you can be more competitive by making an offer with fewer conditions, or in an auction

There’s no cost to getting a preapproval and no obligation. Unfortunately, preapprovals aren’t always available for all banks, when they get busy they restrict them to existing customers or to customers with 20% deposit. Talk to your Mortgage Advisor to find out if you can get a preapproval.

3. Find a solicitor (property lawyer) early

You need a solicitor to give you legal advice, review properties for you, and to handle the transactions when you buy. A lot of people leave finding a solicitor to the last minute because they think it will cost them more money, and then end up having to rush when they want to make an offer.

Most solicitors charge a flat fee for the full process so there’s no extra cost to talking to them early. This gives you more time to find a solicitor you’re comfortable with and more time to get your offer right.

4. Think outside the box, but do your homework

As house prices have risen, creative ways to buy a first home have become more popular. Lenders have responded to some of these and offer tailored loans, but others are still difficult to get lending for.  

• There are a lot of options for buying with family, whether it’s joint ownership, parents providing a gift or being guarantors, or siblings buying together. Bank policies vary a lot so talk to us about what you’re looking to do.  

• Buying together with friends has become easier, especially if you’re all living in the property (though this is no longer necessary). The main consideration here is making sure you’re all on the same page about how long you intend to own the property, and how you would handle one person leaving early.  

• Tiny homes, kitset or factory builds, and relocatable homes can be a cheaper way to build. However, these usually need a large deposit upfront, and banks won’t lend money until the home is installed on-site. So it’s not always an option unless you have a large deposit (or a family property that can be used as security).

• Shared Equity schemes are slowly growing in popularity. These involve a group of investors “topping up” your deposit to 20%, and you get a home loan for the rest. You then pay them back plus a share of the capital gains or a flat rate. It usually involves higher interest rates as well as the extra repayments, so may be suitable if you have a small deposit but high income.

For all of these you’ll need legal advice, but also feel free to give us a call to discuss.

5. Keep your bank statements clean

What this means is just not to have any unarranged overdrafts, late payments, or missed direct debits in the last 3 months. If you’ve got one or two it’s not the end of the world, but if you’re regularly dipping into unarranged overdrafts you might have trouble getting a loan.  

Get into the habit of making sure everything is paid on time.