first home buyer

We just bought our first home.. phew!!

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Alex has had an exciting summer, not only due to the amazing weather but also the fact that he and his partner have bought their first home. He shares his tips.

 

After gruelling budgeting—ditching brunches and lunches—requesting every favour in the favour-asking-repertoire book and numerous chats with Brendon, my friendly Velocity Mortgage Broker, about “how to get the deal across the line”, finally, our brunch-deprived weekends were spent at open homes, fighting with hordes of other potentially buyers.

 

In the end, we fought off the hordes and secured out little slice of paradise and are proud Wellington homeowners. The road was not easy and let me share a few tips that helped us out a lot.

 

Budget, budget, budget

 

Dreams are great and everyone has them, but only some people achieve them. The difference between people who achieve dreams and people that don’t is often very simple: one just dreams away while the other makes a plan.

 

The vast majority of people have to save up for a deposit—unfortunately, these do not just magically appear in our bank accounts. The only way to get there, fast, is to have a goal[1], make a plan and set the budget to achieve it.

 

Making a budget is the real deal; it gives you something to work with, work towards and gives you a sense of achievement. There are many great tools to help you budget. Find a way that works for you. At Velocity we have a useful get-rid-of-your-mortgage budget calculator.

 

Get professionals involved … early!

 

I can’t stress enough how important it is having professionals involved. Unless you are one or have extensive practical experience, prioritise seeking out assistance. Here are some examples of useful pros:

 

-       Ask the real estate agent for all information about property, neighbourhood, disclosures, etc.;

-       Get your lawyer to check the LIM and other documents;

-       Get a buyer’s building inspector in;

-       Contact your mortgage broker (that’s us) early to sort finance for that specific house;

-       Drop a line to your insurance broker to get an insurance certificate for the specific property;

-       Do extra checks—parking, public transport, cost of renovations etc.

 

All these professionals do these things on a daily basis and, when compared to taking a DIY approach, can save you vast amounts of money, time and stress.

 

After living in our new place for two months while the first round of renovations are taking place, I can testify to the need to avoid DIY-ing it whenever possible.

 

Next time: Budget and goal-setting tools and tips

 

Alex Barendregt 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.

 

 

 

 

[1] A good goals setting tool is the SMART technique – which encompasses all areas of setting and achieving a goal by making it – Specific, Measurable, Achievable Relevant/Realistic and Time bound.

 

The desperate first-home buyers’ guide to buying

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Although it can seem like all the doors are being closed to first-home buyers in today’s market, Kylie offers some wonderful workarounds that can get you into your first home.

 

It’s no wonder first-home buyers are feeling the doom and gloom when it comes to stepping on to the property ladder. Most banks require a 20 per cent deposit and the average New Zealand house price is now around $600k (and Auckland $1mil). So, it’s fair to say times are a little tough.

 

However, there are still options out there for those who don’t have a 20 per cent deposit, so don’t give up on saving just yet! Remember, LVR rules aren’t permanent, so what might seem impossible now, might very well be possible in the near-future.

 

In the meantime, let’s have a look at some current options:

 

Build your own home

This is a great option for first-home buyers as you only need a 10 per cent deposit. Plus, if you’re building as a first-home buyer and qualify for the Housing NZ HomeStart Grant, then the grant is effectively doubled to $2000 per year of membership in the scheme (up to $10,000 for five years for each member). (Note: There is a maximum income threshold and also a maximum house price of $550k in the Wellington region.) This means that in most cases a couple would be given $20,000 to put towards their build.

 

Family assistance

There are several ways a family member(s) can help you get into your first home:

 

1)    Gift the deposit (some banks will still require you to have saved at least five per cent of genuine savings).

2)    Allow their house to be used as security. In this case, no deposit is required but you will need to have both good income and credit history.

3)    Purchase the property jointly with another family member.

4)    A family member buys the house as an investment, with the children to live in, and pays the costs. Once equity/credit allows, the children can purchase the property.

 

Welcome Home Loan

The “Welcome Home Loan” is a government-backed loan aimed at getting middle income New Zealanders into their first home without needing a large deposit. Just a 10 per cent deposit is required and this can be gifted. There is a set criteria with maximum house price and income caps, as well as a one per cent fee.

 

Non-banks

There are 90-per-cent lend options with non-banks. This could be an option for those who don’t qualify for the Welcome Home Loan (whether this is due to high income or they are wishing to purchase a property that is higher than the maximum house price cap with Welcome Home loans). However, you will pay a higher interest rate with a non-bank. They will take 80 per cent of the loan and spread the repayments over 30 years, with the remaining 10 per cent on a high interest rate over a term of, say, 10 years. Once you’ve obtained 80 per cent equity in your home you do still have the option to move to a bank.

 

Some banks are doing “live deals” between 80 and 90 per cent for their existing clients. This is dependent on the funding available on the day, and is very limited. There is less certainty around this lending in the current environment.

 

The above is class advice, however if you would like specific property advice please contact one of our Mortgage brokers.  For further information click here for our First Home Buyer’s Guide

 

 

Considering building? Here are your financing options

With our current housing shortage, building your own dream home can look mighty appealing. But what will your bank think and is there any government assistance?

 

If you are considering building there are several financing options available. We’ll get to these shortly, but firstly a note about LVRs and the HomeStart Grant.

 

The Reserve Bank LVR rules don’t apply to those building a new home. This exemption applies to both owner-occupied and residential property investors. So this is a great option for those who don’t have the required 40 per cent deposit for an existing property but wish to add to their property investment portfolio.

 

If you are a first-home buyer and qualify for the Housing NZ HomeStart Grant, then the grant is effectively doubled to $2000 per year of membership in the scheme, of up to $10,000 for five years for each member if you are building.

 

So, all this considered, here are your financing options (and remember that each bank treats construction loans slightly differently): 

 

Fixed-Price Contract

Your builder provides a single, fixed price to complete the build. The contract is “all inclusive”. Mortgage repayments need to be paid while the build is being completed, so if you are renting during this process you’ll need to be able to service both your weekly rent and the mounting repayments on the new build. Banks will generally lend between 80 and 90 per cent on the cost of the project.

 

A Turn-Key Loan (Land and Build Packages)

In this case, the property (land and house) is purchased once completed. A contract is generally entered into before building starts and a deposit paid at this stage. The ownership of the property is transferred from the building developer to you once the house is built.

 

These can be a little more expensive than the fixed-price contract option, however, there are no mortgage repayments required during the build process. Banks will lend up to 90 per cent of the price of a turn-key project.

 

Purchasing Land

In the current market, most banks will lend 80 per cent against a piece of land, assuming it is zoned residential and has the services—power, water, sewerage— available. Most banks will only lend 80% if building will commence on the land within 12 months.

 

Build Yourself

If you are a tradie and are building the home yourself or you are project managing the build, banks will lend between 50 and 80 per cent of the build costs.

 

There you have it. If you’d like to talk through your dream home with us, we might not be so helpful when it comes to choosing curtain patterns but we can certainly help get the cash so you can order the right curtains.

Two Top Tips for Buying Your First Home

Lance Shearman shares two valuable lessons from the Boy Scouts and childbirth for improving your chances in buying your first home. 

If I learnt anything from the Boy Scouts, it was to be prepared (Disclaimer: I was never actually a Boy Scout, however, they still have great words to live by!). Whether for an exam, presentation, sporting event, or if you have a house full of kids to send off in all directions the following morning, you know it is great to be organised the night before. So, when you are looking to purchase a property there is no difference.

 

1) Be prepared!

 

People who are successful in buying homes typically have their ducks in a row, finance confirmed, and solicitor locked in. They also understand that the GV may not be as helpful a guide as researching the prices of comparable properties that have recently sold. You do this and you have given yourself the best shot at owning your first home. Plus, this will also help with the next point.

 

2) Relax … you are supposed to be stressed!

 

Whoever told you that purchasing your first home would be an amazing experience is possibly the same person who will tell you that childbirth is a breeze (Disclaimer: I have never given birth, but it does look painful). Instead, you should worry (to some degree) and you should stress (at some level) and the sooner you come to peace with that the more you will relax about the highs and lows of property acquisition.

 

You are about to spend a whole lot of cash on something very important to you, and you will put faith in a lot of people you have possibly never met before. Buying your first home is not something you do every day. It is a big deal and important. Experts who do this every day are integral in keeping a lid on the stress levels and guiding you through step-by-step.

 

3) This final tip is for free

 

Advice from family and friends that was once helpful advice may not be so helpful today with bank policies in constant change and houses selling so fast (and often for higher than expected prices). So, do listen respectfully to the advice of friends and family, but then just confirm it with an expert. The advice might be spot on, however, it is always helpful to check with those who work in this space every day.

 

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.

Should I just give up on buying a house?

It’s tempting for homebuyers to give up the chase in this runaway market. But Lance Shearman offers a pep talk and a strategy to keep you in the hunt … and even ahead of the pack. 

I get it; the current market can feel like you are trying to jump on the treadmill of the house acquisition process while someone has left the machine on hyper speed!

You have spent months looking through houses and find there are very few for sale that met your needs. You are going weekly to open homes with 100s of people spilling out of them. You even look in areas that people would not dare be seen even driving past, to find that these too are now hot property … what the!

Your motivation may be somewhat lower than it used to be as the dream of owning your first (or another) property feels like its slipping away through your grasp.

Let me revitalise those home-owning dreams and give you the property owner’s equivalent of a rejuvenating facemask (apologies, I write this whilst watching the Real Housewives of Auckland—I’m not proud of this, but it has inspired me … somewhat).

The people who are successful in today’s house hunting climate are the people who do the following:

They get a group of professionals around them, cheering them on, answering their questions, because in this market you need to be ready to buy NOW and you need to know how to buy. People who get property are the best prepared, have ticked all the boxes they can, and have professionals taking care of the rest.  

So if you’re a little tired, a little frustrated, and a little down, know that you’re not not yet out! Talk to us at Velocity Financial. We will sit with you, hear about your journey so far, strategize, and help connect the dots to put you ahead of the rest with your personal squad of experts.

 

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.

 

Two Big Shifts in Banks’ Lending

We’ve talked recently about how the banks are tightening the screws of their lending. Here are two recent changes that are creating increasing challenges for borrowers:

 

BANKS ARE CHECKING THE SMALL STUFF

More than ever, banks are going through our applications with a fine-tooth comb. They want to make sure that full-expense budgets have been completed and that these align with bank statements. As an example, we have had deals declined because of two or three unarranged overdraft fees on bank statements.

 

On a similar note, banks want confirmation of where your deposit has come from. So having $30,000 show up in one lump sum into a bank account will raise some questions. The origin of these funds needs to be verified. This has always been the case but our observation is that banks are becoming more particular about these smaller points at the moment.

 

IF IT’S NOT PLAIN VANILLA, THEY’RE NOT INTERESTED

There is no real appetite from banks to do deals that are outside the ordinary—they’re passing up Goody Goody Gum Drops in favour of boring old vanilla.

 

Within banks right now, it seems the credit department is winning over the sales department. They are more concerned about protection and bracing themselves for the uncertainty of the future rather than growing their customers numbers.

 

So, if you are a standard customer with a 20 per cent saved deposit on a good PAYE income, certainly there is no problem getting money. However, if your income is variable, if you are new to business or if the house is out of the ordinary, there are more questions and more challenges being raised by the banks.

 

As always, we will keep you posted with the latest changes. It is our job to stay on top of what the banks are doing so that we are able to provide the best possible advise and mortgage solutions for our clients.

 

Don't hesitate to run your scenario past us if that would be helpful

 

 

Brendon Ojala 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.

Five Rules for Today’s First-Home Buyer

How on earth does a first-home buyer get a foot on the ladder in today’s housing market? Brendon sifts through the media hype and sales frenzies to provide some helpful steps forward.

 

I was watching a TV interview recently with Minister of Finance Bill English (as you do!). He was asked what advice he would give to first-home buyers (the question was aimed at the Auckland market). His advice was that first-home buyers should have patience.

 

He said, “There are some risks with taking out a mortgage that stretches a two-income family right now.”

 

He was then pushed further: “So people shouldn’t buy right now?.”

 

And, with what I detected to be a hidden grin on his face, he suggested that buyers “have to make their own decisions.”

 

Furthermore he said, “Our counsel is to have patience right now, supply is coming. It is likely that prices will flatten and maybe even drop back a bit.”

 

So there you have it, advise for first-home buyers.

 

If I were a first-home buyer I’m not sure how I would feel about that advice.  Sure, supply may be coming but arguably nowhere near enough and nowhere near fast enough. And if I’ve been saving for a deposit for many years and was faced with house inflation of ten per cent per annum, I know for sure what I would feel about that advice.

 

Where I know he is correct is in noting that there are risks in taking out big mortgages that you can only just afford now, particularly with record low interest rates that are sure to rise at some point in the future.

 

However, here are a few of my tips for first-home buyers. I know the Wellington market better than Auckland, so these comments are particularly aimed at the capital. However, I would assume most of this is transferable as well.

 

I’ll start by saying that it is an extremely difficult time to buy a house in a major city in New Zealand right now, and I understand why many people give up and believe they are never going to be able to afford a house. So you do need to look at your own situation and the market to make a decision. Here are your options:

  • If you think prices will continue to increase in the foreseeable future, you really do need to get in;
  • If you think a correction is coming, then perhaps hold off a bit.

 

If you have decided now is the time …  read on, these tips are for you!

 

1) Be Aggressive: If you want to purchase a property now you do need to be aggressive. I just don’t see anybody being successful by sniffing around trying to get a bargain. At best they are getting a fair price, however, people are generally paying top dollar to secure a property right now. There is a supply and demand issue in Wellington right now. Real estate agents are quoting the total number of listings in the Wellington area at under 400 properties. Typically, for this time of year, that is around the 1000 mark. So, there is almost two-thirds less stock than is normal. 

 

2) Be Cautious: If I owned a property that had “some problems” I would be putting my house on the market now. So, if you are a desperate home-buyer, make sure you are not buying a liability. It is easy not to do all your house checks in a frenzied market. However, I would advise you to proceed with caution when doing your property checks.

 

3) Avoid Finance Clauses: You do need to get yourself in a position to make cash offers on property. It is almost invariable that the competition will be making cash offers as well, so be aware of that. This of course is all redundant when it comes to an auction … but particular relevant for tenders or deadline marketing.

 

However, if you have been pre-approved by a bank with a 10% deposit, the bank will require a “Registered Valuation” which puts you in a significant dilemma. Do you get a valuation before making an offer and spend $700 on that or do you make an offer conditional on valuation, which could potentially be less likely to succeed? Tough call! 

 

If you want to buy a house via negotiation, take advantage of that. Make an offer quickly. With this form of purchase, speed is arguably more important than a “clean offer”. If your offer is successful, you then have bought some time to get your conditions sorted out.

 

4) Talk to Your Landlord: If you are renting and you like the house you are living in, why don’t you ask your landlord if they are interested in selling it to you? If they are, this can take away the pressure of competition. Historically, you may have done this to get a bargain but even if you can get a fair price or even pay an aggressive price, it still means that you are in the market.

 

5) Consider Building. If you are in that $400,000 plus range, you could consider building. Organising finance is similar for a build deal; so don’t let this stop you investigating this option. It may mean, however, that you are living in an area further out of town i.e. in Wellington city flat land is in short supply (to be honest, all land is in short supply) and I would suggest that buying a flat section is going to be a whole lot cheaper in terms of the build than buying a section on a hill.

 

So … apologies folks, there are no magic bullets here. But hopefully I’ve given you some food for thought for navigating this hot market.

 

Velocity is happy to help you through the process so do keep in touch.

 

Brendon 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.

KiwiSaver Basics 101

The two questions asked time and time again by first home buyers are “How can I possibly afford my deposit?” and “Are my KiwiSaver funds REALLY accessible?” Jaimie sifts through all the confusion and media hype KiwiSaver for first-home buyers 101.

 

There is plenty of confusion out there surrounding how much you can borrow from your KiwiSaver. Add to this the way the media focuses on regional house-price caps such as $550,000 for Auckland (or $450,000 for Wellington) in a market where the median house price has just topped $940,000 and the possibility of using KiwiSaver funds immediately disappears in the minds of many potential new buyers.

 

With that in mind, it's probably a good time to clarify the difference between the two options available from KiwiSaver.

 

So the first option is the KiwiSaver First Home Withdrawal. For this there is no regional cap and no maximum on your income.

 

Any first home buyer who is a New Zealand resident and has contributed to their KiwiSaver for a minimum of three years can withdraw ALL of their KiwiSaver savings for the purchase of their first home (except for the initial $1000 kick start). OR if you haven't used your KiwiSaver withdrawal previously and are in a similar financial position as a first home buyer again, you may qualify for the Second Chance Home Withdrawal.

 

The second option is the KiwiSaver HomeStart Grant. This is where the cap and income limit comes in.

 

The HomeStart Grant is basically a FREE gift from the government and can be combined with your First Home Withdrawal. It works like this: If you're a single buyer with a total income under $80,000 or under $120,000 for two or more buyers and have a deposit of at least 10 per cent (including the grant) you may qualify for a one-off contribution of up to $20,000 per couple. The amount available is determined on how long you have made regular KiwiSaver contributions and whether you are purchasing an existing or newly built home.

 

So, with the potential to receive one or both of these funds, all of a sudden you’re a good step closer to that first home!

 

If you would like further information regarding KiwiSaver or sound mortgage advice on what options are available to you please don’t hesitate to contact us. 

 

Jaimie McDonald 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.