Sorting through home loan offers in New Zealand
You want to have your own house and enjoy all the benefits of homeownership.
You feel that it is time for you to buy a home. You no longer want to pay rent. At the same time, you do not have a clear idea of where to start from.
It is perfectly natural for a person in your situation to have lots of questions and to experience some anxiety. Buying a home is probably the biggest financial step that you will ever make. You want to have full confidence that everything will work out just right.
The most important thing is to get all the necessary information about the home buying process. The more knowledge you have the more empowered you will be as a home buyer. In this guide, you will find all the information on buying a home in New Zealand which you will need. Use it to your advantage.
Deciding on Homeownership
If you still have hesitations about buying a home, you should consider the idea of homeownership more carefully. It may not be the perfect choice for every person. You should make a final decision based on your lifestyle, family status, job and future plans.
Renting or buying
You may have to keep renting a property, if you do not have sufficient savings or sufficiently high credit score for getting a home loan. Generally, renting is more flexible and involves fewer responsibilities than homeownership. However, it does not enable you to build wealth over time.
Why buy a house
The total benefit of owning a home exceeds the benefit of renting a property. You will enjoy wealth accumulation and the pride and happiness associated with homeownership. You will be able to use your house as collateral for financing other purchases and projects affordably, if needed.
Buying a house and getting married
It is easier to get a mortgage and to buy a house when you have a spouse and both of you earn income. It is common for people to buy a house after they get married and decide to have children. Still, you can readily buy a house if you are single, as long as you are financially prepared for this step.
Sorting Out Your Finances
You should be fully financially prepared for purchasing a home in New Zealand. For this, you have to assess your financial situation and compare the different mortgage loan options that you have.
Step 1: Get your credit report ready
You should request your report in advance and go over every detail. If you notice any errors, you must request to have them corrected. If you have any past delinquencies, you should do your best to fix them. The less debt you have when you apply for a mortgage the better.
Step 2: Find a lender
Compare the mortgages of as many lenders as possible. The main comparison criteria include interest rate, fees and repayment structure and schedule. You may get a special deal from your bank as a loyal client so it pays off to check what they offer first. You should also consider using the services of a mortgage broker who will do the comparison for you and will offer a deal which meets your requirements closely.
Step 3: Prepare a deposit
The deposit is the amount of money which you pay towards the purchase price of the property. The remainder of the price is covered by the mortgage loan. With a bigger deposit, you will have higher chances of securing a loan. The loan will be cheaper as well since the principal amount will be smaller. The lender may also be able to offer lower interest rate.
Step 4: Consider government help
You can consider a Welcome Home Loan as part of the programme of the Housing New Zealand Corporation. It requires only a 10% deposit while most conventional mortgages require a deposit of 20%. If you join the KiwiSaver scheme, you will be able to use a subsidy or savings withdrawal for paying the deposit.
Step 5: Get pre-approval
If you are preapproved for a mortgage, you will have an effective tool for negotiation when buying a home.
Step 6: Using Professional Help with Home Buying
It is now easier than ever before to find a house through the numerous online listings and arrange a private sale. Still, most home sales in New Zealand are concluded with the professional assistance of a real estate agent. Using this professional service is the better option simply because the agent knows the market and how to negotiate and prepare all documents properly.
Step 7: Why hire an agent
You will get professional help for securing the best deal and you will avoid making costly mistakes.
Step 8: Choosing an agent
You should do research online and ask around. Pick an agent who has considerable experience, excellent achievement record and solid reputation.
Step 9: Dealing with the agent
Check how much the service will cost you and ensure that you can afford to pay for it. Sign an agreement with the agent. Ask all questions which are important to you and keep track of the house buying process.
Home Purchase Mistakes to Avoid
Get familiar with the mistakes most commonly made by house buyers so that you can avoid them.
Don't rely on print ads - Virtually all homes for sale are now advertised online and very few ads appear in the paper. Use the internet to compare as many homes as possible. You will be able to use effective search tools and get plenty of information including pictures of the properties.
Don't make home hunting a tedious and length process - You should not visit every house for sale which appeals to you in person. Your agent should preview the houses which you are interested in professionally and arrange visits only to the ones which match your requirements.
Don't make lust minute changes - You should not take out other loans and make other large purchases before buying a house. You should safeguard your deposit with contract contingencies. You have to be absolutely certain that the house has the right location and features.
Making an Offer & Negotiating
Most homes in New Zealand are sold through an offer and negotiation process. After you place and offer, you and the seller will negotiate the price. Find out how to secure a favourable deal.
Give the offer a personal touch - Your offer should be impeccable when it comes to the technical details, but you will also benefit from adding some personal details about your and your family. This will give you greater bargaining power as the seller will want their home to go to the right people.
Beat competitors - In a tender sale, you will have to make an offer and compete with others. If there are many competitors, you should give your offer a competitive edge by placing a larger deposit or shortening or waiving certain contingencies. A mortgage preapproval letter will make your offer more competitive as well.
Engage in negotiation - Arm yourself with market information to show the seller that you have offered a fair price which is the best one that they can get in the current situation. It pays off to have some flexibility as well just in case.
You have to be certain that the house which you will buy is in good condition. This is where property inspection comes in.
What is included - Go over the list of items which the inspector will check and confirm that no important house feature is missing.
Be aware of material facts - These are property defects which may have an impact on the purchase decision and the property price. These can be paint with lead or asbestos construction elements, for example. The material facts must be disclosed to the buyer.
A last run - Confirm that everything is in order by running a final inspection on the day before you close the home purchase deal.
Closing the Deal
The home sale transactions in New Zealand can take up to two and possibly three months to close. You should make your plans in line with this. It is best if you arrange a moving service well in advance so that there are no further delays. Other things to take care of include:
Home insurance purchase - You should get your home covered straight away. Compare quotes to find the right policy. You may get a discount deal from your car insurer.
Consider getting title insurance - It will give you protection in case of incorrect titles or issues which have not been identified throughout the property search.
Once the closing process is completed, you will have your own home in New Zealand.