How To Buy Your First Home This Year!

With the ever-changing housing market and fluctuating interest rates, it’s important to be well-informed and prepared as a first home buyer.

Buying your first home IS achievable so in this article, we’ll provide you with some valuable tips and strategies to navigate the process of buying your first home this year.

Overview of the Housing Market

The housing market in New Zealand has experienced significant fluctuations in recent years.  Currently we are seeing lower prices which widens the range of properties available for first home buyers. You may be able to get a property with more bedrooms or a standalone house rather than a townhouse or apartment. There has also been a noticeable increase in the number of mortgages approved for first home buyers. CoreLogic’s First Home Buyer report which is released every 6 months, highlights that first home buyers continue to hold a record high market share, despite affordability pressures and tight lending conditions.

The Impact of Interest Rates – First Home Buyer

While house prices have seen a decline, the impact of high interest rates remains a significant factor for first home buyers.  The average home loan interest rate has risen quite considerably over the past few years, resulting in higher repayment amounts.  However, for first-home buyers the potential benefit of lower prices can outweigh higher mortgage rates, and that’s due to the fact that you won’t need as much of a deposit to purchase a house.  For example, you may be able to save over $50,000 on the purchase price compared to if you had bought 2 years ago. You will still have to pay a higher mortgage rate, but it will be on a smaller mortgage, so saving that money at the beginning of your home loan journey is worth a lot in the long term.

Preparing to Buy – Understanding the Process 

Before diving into the housing market, it’s essential to familiarise yourself with the home buying process.  Talk to friends or family members who have recently bought a home and seek advice and guidance from a Mortgage Adviser. The more you know up front, the less overwhelming the process will be.

Pre-Approved Finance for the First Home Buyer

Buying a home is a major financial commitment, and one of the first steps you should take is to get pre-approved for a mortgage. Pre-approval is a process where a lender assesses your financial situation and determines how much money they are willing to lend you for a home purchase.  One of the biggest advantages of having a pre-approval is that it gives you a clear understanding of your budget.  With a pre-approved loan amount in hand, you can confidently search for properties within your price range, saving you time and avoiding disappointment.

Research and Due Diligence 

Once you have that pre-approval in hand, do your homework before entering the market.  Research property listings to gain insights into the selling prices in your desired area.  Compare recently sold properties to understand the market value. Attend open homes and auctions to get a feel for the current market conditions.  This research will help you feel confident to make informed decisions and negotiate effectively.

First Home Buyer Financing Options 

It is still quite challenging to get finance if you have less than a 20% deposit.  That’s not to say it can’t be done, but if you are looking to borrow with less than 20% deposit it can be a lot more difficult & expensive.

It all comes down to risk. By having a larger deposit you are perceived as a lower-risk borrower, resulting in more favourable borrowing terms such as access to discounted interest rates and not having to pay low equity fees.  Additionally, for you the borrower, a higher deposit means a smaller loan amount leading to lower monthly repayments and reduced interest costs over the life of the loan.

Banks also have some restrictions around how much money they can lend to borrowers with less than 20% deposit. Currently, they can allocate only 20% of their total lending to low-equity borrowers. This not only restricts the amount of funding available, but it also means that low-deposit borrowers may face more stringent requirements and potentially higher interest rates and fees imposed by the banks.

By working closely with a Mortgage Adviser early on in the process, we can look into other ways to boost your deposit to get you out of the high risk zone.

Here are just some of the ways you can boost your deposit to help get you on the property ladder sooner:

Co-Ownership with friends or family

Co-ownership is a different way to get into a property, by teaming up with friends or family members.  It offers an opportunity to make home ownership more affordable and attainable, especially for those who find saving for a deposit challenging. By pooling resources, co-ownership allows you to share the costs and responsibilities of buying a property, making it an attractive option for many.

First Home Buyer Loans

With a First Home Loan, you only need to provide a 5% deposit, making it easier for you to purchase your first home. The 5% can be made up of:

• Your KiwiSaver first-home withdrawal
• Money that you have saved in the bank
• Money you have already paid towards the property
• A gifted amount from a close family member

First Home Loans are backed by Kāinga Ora which are exclusively provided by specific banks to allow for lending options that may not align with their typical lending criteria so make sure to talk to a Mortgage Adviser first to get the right option if you’re a first home buyer.

Buying your first home is an exciting milestone, and with the right knowledge and preparation, you can navigate the process successfully.

Working with a Mortgage Adviser can provide you with expert guidance and support throughout the home buying journey. We can help you secure a pre-approval, negotiate interest rates, and navigate the intricacies of the buying process.

Remember to be realistic, compromise when necessary, and stay informed about market trends. With determination and the right support, this could be the year you become a proud homeowner.

Get in touch if you need a hand!

Applications for finance are subject to meeting the lenders criteria, terms, and conditions. Refer to our website www.hbmi.co.nz for our Public Disclosure Document.