Buying your first home, or first home in a new country like New Zealand, can be daunting. We have some tips from experience to show that careful planning makes it much easier to understand and manage the costs involved in buying a home. It can also be helpful to ask for advice specific to your situation from your mortgage broker, bank or real estate agent.
Craig Pope of Pope & Co Mortgages says that planning up front can really make a difference.
“Although it's not as exciting as browsing Trade Me or looking through property adverts, mortgage planning is something that, if done well, can reduce stress and make the process much easier and more enjoyable,” says Craig Pope.
The main costs buyers need to consider
Legal fees — In order to buy a house you need a lawyer to handle the sale and purchase agreement or documentation when you make an offer. Costs vary and many banks offer money towards legal fees when you have a mortgage with them. We recommend you ask your mortgage broker or bank for advice. It can be possible to still get cash incentives from banks, especially if the deposit is 20% or more. If your deposit is less than 20%, then cash incentives will be lower and sometimes not available. Legal fees need to be budgeted for, especially if using KiwiSaver and in case an offer isn’t accepted. Budget for at least $1500 NZD in legal fees.
Bank mortgage fees — A mortgage broker service is usually free (with conditions applying). If your deposit is less than 20% then there could be low equity fees and admin fees from your bank. A mortgage broker will help you to negotiate this. Generally buyers with less than 20% deposit can't be too picky as often it’s difficult enough just getting an approval, but every situation is different.
Building reports, LIM reports and valuation costs — Once you are interested in a house you may wish to obtain a building report to ensure there are no major issues that will cost you later on e.g repairs that are needed or a leaky roof, or you can make a building report a condition of your offer to purchase.
For a building report allow $700-$900 NZD. If you would like a valuation done (by an independent valuer), or your bank requires one, this will cost around $750-$850 NZD. Your lawyer or bank can provide some advice on this.
A LIM (Land Information Memorandum) is a comprehensive report that has all the relevant information that the Council knows about a property or section. This includes information the Council holds on private and public stormwater and sewerage drains, rates information, and any consents, notices, orders or requisitions affecting the land or buildings. You can read more about this on the Wellington City Council website.
LIM reports cost around $400 NZD.
Tips for saving for a house deposit
The size of your deposit is one factor that determines how much you can borrow. What you earn and can realistically pay in mortgage repayments is also considered by your bank. Here are some general tips to help you save for your house deposit.
- Spend less than you earn.
- Try to develop a savings history even if it’s a small one, on top of contributing to KiwiSaver, as this will help you with securing a mortgage.
- Avoid taking on new debt like buying expensive cars.
- Chip away at paying down existing debt as well as saving for your deposit.
- Find out about whether you are eligible for KiwiSaver and/or the HomeStart Grant.
Setting up your new home
Moving into your new home is exciting! But first you need to move your belongings from one place to another. There are various removal companies who can help with this. Your mortgage broker or real estate agent may be able to recommend companies in your area. The main costs of moving into a new home include moving costs and obtaining home and contents insurance. These costs will vary and we suggest budgeting for $500-$2000 for this. You will also need to check your local council rates and budget for these on an ongoing basis.
Useful Budgeting and Planning Resources
Craig Pope of Pope & Co Mortgages has developed a first-home buyers' kit to help guide people on their home buying journey. The First-Home Buyers' Guide is full of helpful information and tools, including:
- Questions to ask the real estate agent.
- Tips for getting pre-approved for a mortgage.
- Tips for winning tenders.
- How to make an offer.
- Things to check for in a property.
- What's required for a mortgage application.