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.
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.
These resource pages are also useful for affordability calculations –
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.
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.
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.
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 –
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.
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.
You need to callow for the extra costs on top of the property price. These can include:
A lawyer or conveyancer
|Land Information Memorandum||From $250|
|Valuer||$500 to $800|
|Pre-purchase inspection||$450 to $1000|
|Engineering report||From $450|
|Legal Fees||From $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 vendor||Varies 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 costs||Up 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.
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:
2. House Buying Budget. This Page.