Lance shares some highlights from the first of the Buyers’ Club evenings.
On the 7th September 2015 I teamed up with a brilliant solicitor, James, and a super star agent, Alice, to run an interactive evening focused on helping first home buyers understand and relax in the house buying process. In case you missed it, below is the brief outline of what we covered:
1. What banks are looking for
2. What lawyers are looking for
3. What you should be looking for
What banks are looking for
When hoping to gain a successful application for a home loan there are three main criteria that the bank is looking for and it’s helpful to look at them like the three stages of a triathlon:
The Swim (a.k.a. Deposit): It is optimal to have a 20 per cent deposit and if you have this you are one third of the way toward receiving a success application. However, this being said, banks do lend above this, so do not in any way be put off if your deposit is closer to 10 per cent. Imagine you are a triathlete and you have not had the best swim, you still have the opportunity to make it up on the cycle and run sections.
The Cycle (a.k.a. Serviceability): Can you pay the loan back? Servicing calculators by the banks currently estimate interest rates in the mid-seven per cent range. This is to average out the ebbs and flows of interest rates as they rise and fall over the life of your loan. However, current interest rates are much lower than seven per cent so there is reason to believe your repayments may be lower than those estimated by the online calculator.
Once the bank knows what your repayments will be, they will also want to know how well you can cover your other living expenses. For although it’s nice to own a home, it’s also nice to be able to fill that home with furniture, put food on the table, have heaters running and lights on! So, as you can imagine, it’s perfectly understandable why your lender will want to see a good-sized buffer between your repayments and your income.
The Run (a.k.a. Debt): Having debt may not itself stop you from obtaining a loan, but it may reduce the amount the bank is willing to lend. It comes back to the point above about you being able to cover the regular costs of home loan repayments, living expenses and repayments for any other debt you might have.
What lawyers are looking for
Before talking to your lawyer about the sale and purchase agreement on your future home, it’s helpful for you to think about some of the conditions you’ll want to include in that contract. Here are three contract basics that we covered:
1. Settlement Date: When deciding on a settlement date make sure you leave yourself enough time to give notice to your current landlord and to also complete any checks you want done on the property. If you are obtaining KiwiSaver and don’t have pre-approval it’s a good idea to have a longer settlement timeframe to enable applications to be made.
2. Finance: If you require finance for the purchase, make sure your agreement is subject to you obtaining bank approval.
3. Builder’s Report: Having a builder check out a property is a great idea, they will often pick up issues that you don’t see. You can include a clause for this in the purchase agreement.
What you should be looking for:
1. Have everybody you need on hand: real estate agent, broker, lawyer, builder and valuer.
2. Once you know your price then you will know where to look.
3. Use online tools to help you get the full picture of the property. (CAN YOU PROVIDE SOME EXAMPLES OF THE ONLINE TOOLS AND LINKS?)
4. Understand how the various selling techniques work: tender, buyer enquire over, negotiation and auction.
5. Find out agency rules such as the days on the market before the property can sell, capability to sell prior to tender and rules set around deadlines.
Our next session of the Buyers’ Club tackles the topic of Strategic Buying and is on 5:30pm 21 September 2015 at Level 8, Leaders Real Estate Brandon St. If you are interested in attending feel free to RSVP to me (firstname.lastname@example.org)
Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.