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Buying home for the first time?

We have put together some important information for first home buyers, here. Please take your time to go through it.

How much can I borrow? (AFFORDABILITY)

Even before you start looking for a home you need to know how much you can afford to spend on your loan repayments. You will need to work out your family budget – do your math first…

You will need at least a 5% deposit to put down towards the purchase of your home. This 5% represents your contribution towards the purchase of your home. Ideally you will have saved this amount over the last 3 months or more. In exceptional situations, the lender may consider equity from a family member’s home as a deposit.

How much does your family earn every week/ fortnight/month/year? What is the family spending every week/ fortnight/month/year …include all expenses and do not forget to include any repayments on hire purchases, car & personal loans & any other borrowings. Are you planning a holiday? Budget for this holiday as well.

What are you able to save at the end of the month after providing for all expenses….The savings you have achieved towards the end of the month , after providing for all expenditure ,  should be a guideline to the amount you can afford towards your mortgage repayments.

Most banks & lenders will allow you to borrow between 3 – 5 times your gross annual incomes. The actual amount you can borrow will depend on a number of other factors such as….number of dependent children in the family, size & repayments of any personal borrowings, the type of property you may want to purchase, the amount of initial deposit.

How much should I borrow?


You are in the best position to answer this question as you are in charge of the budget. As a rule of thumb, keep a provision for savings in the budget. This way, when your repayments increase because of an interest rate increase, you have the resources to meet the increased repayment amount.

If your budget allows, always try and pay a little more than what is required as per the mortgage agreement.

If you are considering borrowing a little more than what is the recommended amount for your personal situation, it will be advisable to try and put away the extra repayments while still renting and see if the household budget is still holding well.

What will my repayments be?

Your repayments will be based on the loan structure & interest rate prevailing at the time your loan settles.

Try and budget for some extra payments with your regular repayments. This will help in accelerating the repayment of your mortgage, cutting a few years of the mortgage term and saving you thousands of dollars in interest costs. We shall discuss this aspect in more detail in another chapter.

Will my bank lend me the amount I need to borrow?


You may like to think that your bank is the best option for you. Your bank can offer you a loan based only on the products they sell. This means you will get partial advice. Your bank may lend you the amount you need to settle the purchase transaction.

You not only need the loan….you need impartial advice on how to get the correct loan structure for your unique financial situation. The wrong loan structure can cost you thousands of dollars in interest costs and add extra years to your loan.

  • At Mortgage Mantra, we have the knowledge & experience gained over the last 10 years to assist you with impartial advice based on your unique financial situation.
  • We have the experience to develop a mortgage strategy that will save you time and money. We understand different lenders loan policies clearly and are therefore able to make loan proposals work effectively for you.
  • We operate independently-independent of the lender, the real estate agent, the accountant, the solicitor & other professionals. We always put your interests first. We will not refer you to a lender or another professional unless we are convinced that they share our commitment in providing you with the appropriate advice & guidance.
  • We won’t compromise on our ethics. We will follow the rule-book. This will mean no problems for you or with your lender.
  • We will arrange your loan with the lender that gives you the best overall loan proposal.
  • We have more choices available to us than your bank to find you the right solution.
  • As mortgage advisers we will help you manage your mortgage effectively & put adequate protection/ insurance in place for you.
  • We are able to access non-prime lenders and mortgage providers. This gives us a range of options when it comes to getting unique loan proposals approved.

Where should I buy my first home?


Location is always quite important for a number of reasons.  Location plays a big part in determining a home’s price and its resale potential .It is important to decide on the kind of area you’d like your family to live in and go searching for a home in an area that meets your criteria.

Your criteria may include:

  • Proximity to the local market – a supermarket, fruit & vegetable store, butcher, dairy, restaurants/cafes, boutiques, doctors/medical centers, library, churches, playschool, playgrounds, parks,  gym & swimming pool, etc.
  • Education & high value homes - what are the schools like in the area? You may not have children and aren’t planning any, but being ‘in the zone’ for a popular school can add a significant amount to your home’s value.
  • Sunny outlook & views- Which part of the property does the sun rise on , which part has sunlight during the day, and at what times of the day? Is the surrounding environment pleasant to live in?  Are the homes, gardens and local facilities well cared for?  Is it a safe area?
  • Zoning – what is the zoning in the area and what does it allow?  If it is commercial, there may be business or even industrial developments close to your home in the future. This could affect property values in the future.
  • Transport – how far is the area from your family & friends, or your workplace?  What are the public transport and/or road access like?  
  • ‘Feel’ – is it quiet or ‘busy’?  What are the neighbors like?  Is it a well-established neighborhood or a newer, developing area?


Things to be aware of –buying near the flight path (becomes too noisy), near a busy road or motorway (frequent traffic), or too close to an industrial area.  Some of these areas are quite often less expensive and can appear good value, but they are usually harder to sell and will not appreciate in value so readily.

Homes in a ‘good’ location are popular because:

  • They do not lose their value – even in market downturns
  • Their value goes up more and faster than homes in other areas & they’re easier to sell
  • You are more likely to get your money back or profit from any renovations – that’s why many people advise you to buy ‘the worst home in the best street’, because of the potential for capital gain with a bit of work.


Everyone wants to buy in good locations. This means the competition can be tough and prices can be out of your budget. Be prepared to consider looking elsewhere.

How do I find the right home?


When it comes to looking for the right home you have a range of options, including the Internet, newspapers, real estate publications, real estate agents, open homes, or simply checking out the local area.

 

The Internet

The Internet is a useful home-hunting tool because most property websites have extensive photos of the properties listed.  You can also usually save time by searching for properties that meet your specific criteria.  Here are some useful links:

‘Composite’ real estate sites (featuring listings from a range of areas and agencies):

  • Open 2 View
  • Realestate.co.nz
  • Search 4 Homes (NZ Herald property pages)
  • Trade Me Property
  • The Real Estate Guide
  • All Real Estate


Real estate agencies will also have a website you can use to get information about potential properties.  To find them:

  • Go to Yellow pages and search for ‘real estate agents licensed’ in your area, or
  • Simply go to your preferred search engine and enter in the name of a particular real estate company.


Newspapers

Your local newspaper is another major form of real estate advertising, mainly on Wednesdays and Saturdays.

Real estate publications

Regional real estate publications such as Property Press, The Real Estate Guide or Property Extra have listings from a whole range of real estate companies.  They’re free and readily available – you’ll find them at real estate agents, on stands on the street and at places like bus and train stations.  Many real estate agencies also have their own publications.

Real estate agents

As well as looking at signs on their windows, you can register your interest with as many real estate agents as you like.  Some homes are listed exclusively with one agency, so the more agents you contact the wider you’ll spread your net.  Agents may also let you know of properties that are not officially on the market yet.  Be as specific as possible about what you’re looking for to avoid wasting your time with properties that are clearly unsuitable.

Open Homes

Many properties have open homes during advertised times where you can turn up (usually during the weekend) and take a relaxed look at the property.  The real estate agent will be there to talk to (and they may ask for some contact information so they can follow up with you later).  Open home times are usually listed in the advertisements for that property, and some real estate offices can provide lists of all the open homes they are holding on a particular weekend.

For sale signs

If you are keen on a particular area, simply drive around it and check out the ‘For Sale’ signs in the front of properties.  These will list the real estate agents’ name and contact details; take a note of these and follow up on any properties that look promising.

Ask around

Ask friends, family or colleagues if they know of any suitable homes on the market, or even not on the market.  Some homes never come onto the open market.  There’s nothing to stop you, for example, dropping a note into the letterboxes of homes in an area you’re interested in, saying that you’re looking to buy in the area and listing your contact details – or even knocking on the door of a property you like the look of to find out if the owner is interested in selling it.

Remember, you don't have to buy the first house you see, and always seek advice and opinions from your lawyer, family and friends before signing anything.

What is the best price to offer for the home I like?

Your real estate agent will be able to assist with inputs based on sales records for similar properties sold in the area in recent months. One option will be to ask for a registered valuer to give you a current valuation report for the property. This valuation report service will come at a cost of approximately $500 + GST but will give you a clear price indicator with which you can work.

We will assist you with assessing this information that will help you make the right decision on the price to offer. We will help you find the right house.

What should I look for in the home?

What costs do I have to provide for before & after buying?

Before buying:

You have to budget for quite a few costs before the buying process is completed. These include:

  • A loan application fee of approximately $400 (could be more or even a little lesser), but this may be added to your loan if necessary with the lender’s approval
  • cost of a registered valuers (approximately between $500 -$600) report on the property you wish to purchase
  • a building inspection report (between $400 - $750+GST)
  • a LIM report (approximately $300)
  • Your solicitor’s fee ( between $800 - $1000+GST )
  • Cost of moving


Other additional costs will depend on whether you have been advised by your solicitor / accountant to incorporate a registered company or form a family trust. Your solicitor & accountant will be your best professional guides in these matters.

After buying:

  • Budget for mortgage repayments
  • Budget for council rates
  • Budget for Auckland Regional Council charges ( for those living in the Auckland area)
  • Budget for water rates
  • Budget for home insurance (this is mandatory), home contents insurance
  • Budget for home maintenance & repairs
  • Budget for personal insurance – consider life insurance, income protection insurance, health / medical insurance mortgage protection insurance, trauma & temporary / permanent disability insurance/redundancy insurance

What the banks don't tell you?

What happens if I fall sick and cannot work for some time?

What kind of insurance cover do I need for myself & my family?

How do I apply for my loan?

You have the option of calling us to visit you and we complete the application at your place. Or you can choose to visit us. You can also apply online though we would like to complete your application in person.

As a first step, after your application has been completed & submitted to a lender, we obtain a preapproval letter from a suitable lender which is basically a conditional approval. The initial conditions could include submission of a copy of the sale & purchase agreement, a valuers report and any other condition/s which will help the lender make a full unconditional offer letter available to you.

The pre-approval process normally takes between 5 – 7 working days. In exceptional circumstances, we are able to request the lender for a quicker assessment & turnaround time (between 3-5 days). We strongly recommend that you seek an early pre-approval of your borrowing limits so that the stress is avoided later when you have found the home you are looking for.

The first step in the preapproval process is completing an application. The application lists your assets & liabilities, and income & expenses. To verify these figures we need to support the application with evidence of your income (usually 2 current pay slips or 2 years worth financials if you are in business), evidence of a saved deposit especially if you are borrowing more than 80%, and 3 months of current bank statements. In addition the bank and/or Mortgage Mantra will also complete credit checks on you.

Building a new House

The first step in the process of building your home is to find a suitable section. The guidelines for finding a suitable  location of the section are very similar to the guidelines you read about the location for your first home.You must make the same checklist with regard to location,sunlight,services on the section

( water,power,telephone services)local facilities,schools,parks, access,neighbors & the neighborhood. You should check with the local council if they have any information on the kind of soil that is present on the section & flooding risks if any. You should specifically ask for  a Project Information Memorandum (PIM).  This has useful information including whether there is any risk of erosion, flooding or anything else that you should know beforehand.Before you decide on buying a section, you must get an architect & a builder to look at it and confirm it is suitable for the home you want to build.  The section may not be large enough or it may have other setbacks that may rule it out for you. It is advisable to know this before you make your buying decision.

When you are building a new house and need a loan to assist you with the construction of the house, you are approaching the lender for a construction loan. Again,all lenders have different guidelines when it comes to lending to build.Some lenders will lend only between 70% to 80% of value of the finished value,while some lenders may  go up to 90%. With a new build you should get a fixed price contract ideally with a master or certified builder as their work will be guaranteed.

Before the mortgage is fully approved you will need to get a Registered Valuation and we will agree with the builder and the lender at what stages during the build that progress payments will be made. At each stage the bank may ask for an updated “as is” valuation and we’ll need to stay below the lender’s loan-to-value cap (generally 80%) throughout the build.

Most banks lend against the project cost. Sovereign is a bit different and lets us use an acquisition price that makes allowance for “reserves” and interest capitalization. This along with some other differences around the build management make Sovereign a good choice for these types of mortgages.

Ring us today for the best advice on mortgages!

0800 728 474