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Buy A House – Budget

Buy a house

Buy a house – There needs careful consideration to avoid any budget blow outs.

Budget considerations include:

Deposit – How much do you have to have for a deposit? In most cases the minimum is at least %20 deposit.

If you’re eligible for a Welcome home Loan, you may be able to borrow with less than a %20 deposit. This is a scheme supported by Housing New Zealand. Go here to find out more.

http://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/welcome-home-loan/

How much you can borrow is based on how much you can afford to repay regularly.

Have a play with this mortgage calculator to see some options.

http://www.interest.co.nz/calculators/mortgage-calculator

These resource pages are also useful for affordability calculations –

https://www.sorted.org.nz/tools/mortgage-calculator

https://www.kiwibank.co.nz/personal-banking/home-loans/mortgage-calculators/?o=brw#how-much-could-i-borrow

Kiwi Saver

If you’ve been contributing for at least three years, you may be eligible for a KiwiSaver HomeStart grant. Follow the link below to find out more.

http://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-homestart-grant-and-savings-withdrawal/

Low Equity Fee (LEF)

If you have a deposit of less than 20 % you may be charged a LEF. Which is a one off fee charged at the start of the loan. You can usually choose to pay it in a lump sum at the start or add it to your loan in which case you’ll pay interest on it over the course of your loan.

Regular Savings

Banks like to see a regular saving record over a period of time. It is a good idea to set up a separate account that you don’t touch until you’re close to your deposit goal. This will help prove to a potential lender that you have an ability to repay their loan.

Here’s a useful tool for calculating a saving budget.

https://www.sorted.org.nz/tools/budgeting-tool/welcome

Deposit Interest Rates

Get the highest interest rate on your savings. Choose which bank you think is best and stay with them. That way they are more likely to lend to you as long term customer, with a good savings record. Compare the deposit interest rate being paid here –

http://www.interest.co.nz/saving/term-deposits-1-to-9-months

Pay Off Debt

When you apply for a loan any debts you have will be taken into account. So it’s best to pay off as many debts as you can before applying for a loan. Interest on debt is usually higher than interest paid on deposits, so it is financially prudent to pay off debt before accumulating significant savings.

Consolidate Debt

Consider consolidating debt from credit cards and hire purchases into a lower interest personal loan. Credit cards and hire purchase debts usually have higher interest rates than a personal loan from a major bank.

Conditional Approval Of A Loan

Once you’ve reached your deposit savings goal it’s a good idea to get conditional approval for a loan, so you can make an offer on a property with confidence knowing how much money will be available to you. This can help in a negotiating situation. Conditional approval is typically free.

You may want to include a condition in an offer to purchase “Subject to finance.” This gives you time to sort out the finance.

Extra Costs

You need to callow for the extra costs on top of the property price. These can include:

Property valuers

House inspectors

A lawyer or conveyancer

ExpenseAmount
Land Information MemorandumFrom $250
Valuer$500 to $800
Pre-purchase inspection$450 to $1000
Engineering reportFrom $450
Legal FeesFrom $800
Home loan application fee$0 to $500
Low equity premium
(Can be charged if you borrow more than 80%)
Up to $3,500. Can be added to your mortgage.
Share of rates already paid by the vendorVaries and can be negotiated.
Typically around $100 to $1000
Connecting electricity, phone, gas, satellite TV$100 to $500
House searching costs (Fuel, mobile phone calls, time off work)$50 and upwards
House moving costsUp to $500 within your city.
Up to $3,500 with in your country
Recurring costs (Can usually be paid monthly, quarterly or annually)
House Insurance$500 to $1,500
Income Protection and/or Mortgage and/or Life Insurance$500 to $1000

You may be able to reduce some of these costs when you buy a house, such as DIY house moving. But they need to be considered in your budget.

It’s best to avoid putting these charges on the credit card, especially before getting approval for your loan from the bank, because they take these debts into account. You would be better borrowing a bit more on your loan if you have to because it will be at a lower interest rate rate than credit card debt which is typically around 20% interest rate.

Some banks will waive their fees or even offer incentives such as a free TV or contributing to legal expenses, to potential customers who want to buy a house, so be prepared to negotiate with potential lenders.

buy a house

Continue to part 3 of the Buying A House Guide –

Selling Your House And Then Buying Another One

Go Back to the start of Buying A House Guide

 

House Buying Guide page order:

1. Pros And Cons Of Owning Versus Renting

2. House Buying Budget. This Page.

3. Selling Your House And Then Buying Another One

4. Cost Of Living Once You’ve Moved In

5. What Do I Need Versus What I Want

6. Choosing A Property

7. Building Types

8. Understanding Purchase Methods

9. The property Search

10. Researching The Property

11. Making And Settling An Offer

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