Have a Mortgage Budget and Leave Some Decent Breathing Space
Unsure of what you can borrow and how much you can afford to pay on a mortgage? Our calculators put you at ease: How Much Can I Borrow? – what you can afford is based on your income. Mortgage Calculator – find out exactly what the cost of a mortgage is per week, month or fortnight, and how much interest you will pay in total.
Mortgage Amortisation Calculator – find out how mortgages work and when you’ll pay it off. Know this: Banks want to sell mortgages, and while they need to be responsible lenders, there is a risk you could borrow more than you can really afford. Do your own budget and be realistic – mortgage struggles are rife all over New Zealand (as this article outlines), and it creates a lot of stress and tension in any relationship. Having a manageable mortgage is an undeniable way to live happier. Quite simply, if you over-budget your property purchase, life can become a struggle, and you run the risk of being cash poor and unable to pay for emergencies.
ONLY View Properties you CAN Afford
It’s pointless having unrealistic aspirations about house hunting. While a fair few homes are marketed as auctions, you can easily find out a price range from the agent.
Be prudent – there’s no point in wasting your time and the seller and agent’s time if you can’t afford the price. Agents will remember you, and it may cost you later on.
Don’t Muck Around an Agent – They WILL Remember You
New Zealand is small, and agents talk among themselves. No matter the shape of the market, you will be remembered if you stuff people around and it may make it harder to negotiate if you have a bad reputation. Don’t make an offer if you have doubts, and always be responsive to an agent if you’re serious about a property.
Look at free house sale price data to get an idea of recent sales and prices Kiwis are now very savvy with online tools that isolate and value property. This information is available free of charge in most instances. Popular sites include: Homes.co.nz QV.co.nz oneroof.co.nz Interest.co.nz (for property market commentary) Expert Tip – You can also search the address, and use Google cache to see deleted property adverts with all the pictures and prices.
Your First Open Home The entire process can be an easy road, from looking online for a property to getting the keys and moving in, but it depends on how much you know about the process. Generally, the steps involved are in this order:
Research the area, look online and in the newspaper, contact agents. Talk to banks and/or a mortgage broker to get a loan amount in principle. A mortgage in principle is the loan amount you will be able to take from the lender. Having a loan amount in principle makes the buying process faster and easier, as you know what you can (and can’t) afford from day one. We cover this in more detail below.
Visit an open home, ask questions and take photos. Inform the Agent of your interest and arrange checks This includes getting a valuation report and builders report to check that everything is as it should be. This takes around seven days. Make an offer: Once you’re happy to proceed, inform the agent what your best price is, and specify any conditions you may have (i.e. move in date, leaving an existing trampoline etc). Wait for the offer to be accepted If it is, great. If not, you can continue to negotiate if you really have your heart on the property. Once accepted, hire a lawyer to do the conveyancing and draw down on the mortgage when needed. Your solicitor checks any legal issues and raises any issues with you, as well as receiving the mortgage funds from your lender to settle the purchase later on.
At this stage, you pay a deposit and have a contract to settle the purchase price at a specific date (‘Settlement date’). Settlement date You transfer the money to your lawyer in most cases, who then passes it to the seller’s lawyer. You, in turn, receive the keys to the property and the deeds to ownership – the property is now legally yours.
You will usually be given a mortgage if you meet the following criteria: Employed for a minimum of 2 years Have a taxable income Have at least a 20% deposit for the value of the property. Are not a bankrupt or under the supervision of the Official Assignee.
The ‘suitable credit score’ factor is important, and to make sure the credit history lenders see is correct, it’s worth spending $10 to $20 to access your credit history. Read our credit score and credit history guide for more information.
Banks offer a ‘mortgage in principle’ (MIP) which is a provisional amount you can borrow once you find a property. This lets you shop for a home within the dollar amount. An MIP has a time limit, and does not fix the interest rate you’ll be charged. Having an MIP in place gives you the confidence to make an offer, as any offer you make will not be conditional on financing.
If you prefer to talk to someone who is not a lender, making an appointment with a mortgage broker can be helpful. Besides working for you to find the best mortgage deal, they can give you an idea of how much you can borrow. Our guide to mortgage brokers outlines the number of benefits they offer.
When your mortgage deal expires, it will usually jump to the bank’s floating interest rate. In almost all cases, the current mortgage rate deals will be much cheaper, between 1-3% currently. You can compare the difference between the floating/standard rate and the latest 2-year or 5-year mortgage term deals by using our fixed vs floating mortgage calculator.
As an example, a fixed rate of 3.99% compared to a floating rate of 4.99% on a $300,000 mortgage will save you $170 a month ($2,040 over one year). It’s big money, and you should mark in your calendar a reminder a month or two before your current mortgage expires so you can research the best deal and switch with precision saving you money. Our mortgage rates guide lists the latest deals.
Do proper due diligence on a property – the more you know, the easier everything else will be
As your property is your largest purchase, location location location what matters most. You may love the home, but if you don’t love the area you will never be able to move it. A five-point plan of attack is needed to avoid problems or disappointment later on.
Visit the neighbourhood at different times, specifically in the evening after work and during the weekend and be on the lookout for clues. Is there a lot of graffiti? Noisy cars/traffic noise? Traffic jams? Do you like the local shops? Is there a supermarket close by? Public transport? What are the restaurants and bars like? Are the cars clean and well cared for, or burnouts? Are there local parks for families, playgrounds, quiet, safe roads? You can even have a holiday in the area by booking an AirBnB for a night and survey the area, asking your hosts what it’s like. It’s not creepy – the investment justifies your research. The Police give statistics on crime, so look at these. Also, check the government school reports to see the school decile and achievements. Google the area, searching under ‘news’ to see what exactly has been happening.
New Zealanders love a north facing property, with plenty of sun and the idea of a perfect lifestyle. To see when the sun hits your house (and leaves it) at any time of the year, check out SunCalc.org. Any day of the year is covered, so you know exactly how much sun you’ll get on cold winter days and warm summer nights. If the sun map doesn’t deliver what you’re looking for, i.e. there isn’t any sun in the living areas, you can move on to another property.
This may be an obvious step, but Google can reveal the most surprising things about a property, from crime information to old photos and real estate agent listings. Before you go into any property sites or buy valuation reports, a simple eye over the search results will better inform you of the basics.
The internet has made the Property Press and Real Estate office windows far less relevant, and do not be intimidated by asking prices as there is a big difference between what a seller wants and what they will get for their property. To be in the know, register with local real estate agents who can then give you first dibs on a new property. This gives you the upper hand, and beats waiting for it to show online. Popular websites include Trade Me Property (arguably the biggest collection of listings), realestate.co.nz, oneroof.co.nz and QV.co.nz (Valuations New Zealand).
Before you make an offer, you need to ask key open questions and get the answers in writing if possible. When it comes to buying a property, information is your biggest advantage! We have a list of 20 hard-hitting questions to ask your agent:
How long has it been on the market? Where are the owners moving to and why are they selling? How many people have viewed it and how many offers have been received? How much is a power bill in winter and in summer? Have there been any problems with the neighbours? What renovations or modifications have been done, and are they in compliance with local council regulations? How old is the hot water cylinder and is there a warranty on it still? If you are buying an apartment, what is the body corporate fee? Who are the neighbours? How long has the owner lived there? What exactly is included in the sale, i.e. curtains/shades, white goods, fireplace? What is the parking situation, and is on-street parking safe? Have there been any structural, subsidence or liquefaction problems? What’s the council rates bill? What is the broadband speed like, and who is the provider? Has the property ever had a fire/flood/earthquake damage? Does the street have a lot of families, or is it mainly retirees? Is there an active Neighbourhood Watch group in the street/area? If you have children or planning to start a family, where do local children play? Is there criminal activity in the street (drug dealers etc) and has anyone ever been murdered here? (we suggest you Google the address)
If you know of anyone who lives in the area, even a friend of a friend, visit them or set up a coffee with your friends who know them. Basically, ask around – everyone knows someone – so you’ll be sure to get the best insights if you put in the efforts here. Ask what the area is like, ask what the seller is like (if they know of them), and ask what changes are likely to happen in the area over the next few years.
It’s unlikely the house you buy will be the one you live in forever. You may want to go for the lifestyle block with the long commute, but it will be a lot harder to sell than a four bedroom house close to good schools. Ease of resale is really important. And it’s not just location, it’s also the aesthetics of the house. No one wants a house with a bathroom attached to the kitchen, nor do they want a house with a neighbour’s spa pool humming loudly beside the master bedroom. What you tolerate is not the same as the people you’re potentially buying from. Approach house buying without emotion and the outcome will be better.
Your Outside Team
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Aside from business consultation, we are business accountants Wellington who offer accounting, bookkeeping, payroll services designed to help you achieve greater financial success.
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