options for first home buyers

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

 

 

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.

The False Economies of Relocatable Houses

In today’s runaway housing market, does a relocatable home represent a viable option for first-home buyers? Rupert Gough investigates.

 

I don’t know if you’ve heard, but housing in Auckland has got a tad expensive. 

 

Each week there are many articles touting either the inevitable downfall of property or the infinite despair of the first-home buyer. I know this, because it’s my job to load up our social media accounts with relevant articles and, frankly, it takes no time at all. There are a ton of news articles out there whenever I want them.

 

And then I get this call. 

 

My client has found a section for a reasonable price, about an hour or so north of Auckland, and they’re going to put a relocatable house on it. It’ll cost $400k to build or they can simply buy a house and have it moved there for $150k. Sounds easy, right? So, why isn’t everyone doing this?

 

Most of the problem comes down to a cash flow issue. With a $400k house, the banks can lend you 80 per cent (sometimes even 95 per cent) of the build cost.  That means for a $400k house you might need as little as $20-80k (I’m simplifying here but stay with me). For a $150k relocatable house the bank will not lend you anything until the house is on the land, plugged in and ready to go (with a Compliance Certificate).

 

So why are the banks so reluctant? Because the house isn’t of any value to the bank until it is proven to be compliant. It could have broken on the truck while being relocated or it could have shoddy wiring from 1920 when it was last renovated.

 

So for the $150k relocatable house, you will need $150k cash. By this time, the pro-relos will be screaming at their monitors and saying that the resulting mortgage is much less and, of course, yes, you’re correct (so hang up your pitch forks and delete the angry comments).

 

However, for the majority of people who call me, getting the deposit together is the main hurdle they are facing. That’s why they’ve gone in search of the super cheap housing in the first place—not because they are trying to minimise their total mortgage. So, without a very healthy deposit, you’re just not going to get the bank’s support for that relocated house.

 

So, here is the lesson to take away: Houses, like wine and life-partners, are actually worse for you when they’re unbelievably cheap.

 

Rupert Gough is an Authorised 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.