NZHL (New Zealand Home Loans) Pukekohe New Business Consultant, Jacob Van Winden, shares his recent experience purchasing his first home. His guidance to those looking to buy is to do your research, get advice (sooner rather than later) and don’t be afraid to ask questions.
My experience
My Fiancé and I bought when FOMO was at an all-time high.
Initially, we put a holding deposit on a new build development, but it didn’t feel right, so we withdrew our offer. Our instincts were spot on – over a year later, construction on the site hasn’t yet begun.
From there, we attended a lot of auctions experiencing the highs and lows of trying to purchase in this competitive environment (including losing an auction that went $1,000 over our budget) before we started to make offers.
Although we loved our house after a walkthrough, it was already under contract, so we put in a backup offer, just in case. The original contract fell through, and we went unconditional on the same day – we were able to move fast and secure the property thanks to our pre-approval.
While I wasn’t yet an NZHL consultant at the time of purchasing, I understood the mechanics of a mortgage (affordability and how to offset interest costs) thanks to growing up with Mortgage Mentor parents.
I encourage parents to start developing their children’s financial literacy young- let them ask you questions and break down the answers without overloading them with details.
Home Buying Workout
When purchasing your first home, there is often a struggle between emotions (the dream of raising a family in this house) versus realism (what the area is like, what is the potential growth value, how can we make this work).
To balance this before going too far along the home buying emotional rollercoaster, I suggest doing a home buying workout:
- Do your research – for new builds, look into the background of the developer, look at the neighbourhood and the site and if needed, ask for advice. Similarly, for pre-existing homes: talk to the experts – get a building and plumbing report, and cover all your bases to avoid surprises when you move in.
- Build your own value around houses – while real estate agents can guide you through price ranges, if you compare to similar houses that you have viewed, you’ll be able to better judge the asking price compared to the market.
- Get a pre-approval – the housing market moves fast; you don’t want to be slowed down by not understanding what the lenders will allow you to borrow.
Preparing to buy
- Proving affordability – Ideally, we need to know you can afford to meet the ongoing repayments of your home loan. To prove affordability, you should have a savings account that you are consistently adding to and not touching.
Essentially: rent + savings = the affordability of a mortgage.
- Reduce short-term debt – where possible pay off short-term debt (credit cards, hire purchases, buy now, pay later payments) you currently have and avoid taking on more debt.
- Building your deposit – with many banks requiring a 20% deposit, growing your savings to cover this is essential. Start by defining your wants versus your needs – for me, working previously in hospitality, I only purchased my ‘wants’ out of my tip money, setting aside any surplus (after needs) from my ordinary pay to build my savings. For those on a salary, consider allocating a set portion of your surplus (after needs) to spending and add the rest to your savings. You may also be eligible to use a portion of your Kiwisaver investment funds towards your deposit.
- Set aside an emergency fund – while the focus is usually on lumping together as much money as possible for a deposit, you also need to consider what happens when you move in. Ideally, you’ll be able to pay for unexpected repairs without taking out another loan. For us, it was a leaking skylight in the middle of winter.
- Insurance – Protect yourself and your financial freedom with adequate insurance coverage. If something were to happen, can you look after yourself and stay on track to achieve your goals?
Ask for advice
If you’re reading this, it’s likely you’re a first-time buyer. My advice is to ask for advice. A lot of people don’t like talking about money, but it’s what we do for a living. And, if you think we haven’t seen it before, you’re probably wrong.
To ensure you’re best set up to achieve your financial goals, you first need to understand what you want to achieve. Don’t be afraid to come in and see us before you’re ready to take out a home loan – 2, 3, 5 years in advance – the sooner you can get a plan together, the sooner you can get on track to buy; it might be quicker than you think.
It’s important to understand your loan, starting from the application stage through to long-term loan payments and what happens in-between – how to pay off your loan, principal versus interest payments and what happens when a fixed-term interest rate expires.
I can’t stress enough: you don’t have to be stuck with the standard 30-year home loan term. There are other ways to pay down your home loan and achieve financial freedom.
At NZHL, we believe financial freedom is being able to set and achieve your goals. After purchasing my home, my current goal is to get married and have an overseas holiday – while staying on track with my home loan repayments.
In conclusion
If I had my time over, I would set aside emergency funds from my house deposit (rather than using hairdryers and silicone to fix a leak), ask for more advice pre-purchase (building and plumbing inspections), and set aside more time to go through and sign ALL the paperwork.
Make sure you build your knowledge base of houses and do your own calculations; for example, look at affordability – what happens if your interest rates or expenses go up?
Take a breath, evaluate and then decide.
And finally, come in and see us. We’re not here to judge – our goal is to help you get into a home, pay off your loan and hopefully help your friends and colleagues.
*Please note – Jacob van Winden is a recent first home buyer and a New Business Consultant/Mortgage Mentor at NZHL Pukekohe and has written this blog based on his personal experience. This blog is intended to be general in nature and should not replace personalised financial advice by your mortgage adviser.
