For first home buyers the property market is a constantly shifting landscape of financial rules and regulations while trying to assess the right time to buy. It’s worth enlisting some help to do the leg work for you.
In our new podcast, Home Truths, Lodge Real Estate residential sales consultant, Paul Conway, and Jordan Cameron, from Total Mortgages, say there are a few things first home buyers can do to make the process smoother.
Find your new home
Start by having a clear picture of the type of home you like and the areas you’re most interested in. By working with one real estate agent who you like and trust, you can cut down on your own leg work visiting multiple open homes to find the property of your dreams, says Paul.
“By working with one agent you can get their advice on what’s selling or not selling in the areas you like, and you may even be able to organise private viewings during the week where you can look at properties in your own comfort without rushing around,” says Paul.
Bear in mind agents get paid when a house sells so if you attend 20 different open homes each agent at each open home gets paid once their specific property sells, so their interest is in marketing that specific property, says Paul.
It doesn’t cost you to work with one agent, they still get paid when a home sells, but their interest is in finding you the property you’re looking for and, in many cases, they will also be able to advise or suggest properties you may not have considered.
Get your finances sorted
Working with a trusted mortgage broker can also help you find the right finance options to get you into your first home. Mortgage brokers are accredited with the major banks and can do an assessment of your situation and advise how much you could borrow. They also know the ins and outs of each bank’s policies and can advise which has the best policy for you and your situation.
“Working with a mortgage broker gives a home buyer a better overview of what’s on offer at each bank and a lot of the time we can also negotiate better interest rates for clients too. We get offered the best rates up front because we bring business to the banks,” says Jordan.
Know all the rules
Recent changes to the Credit Contracts and Consumer Finance Act (CCCFA) and Reserve Bank impositions like loan-to-value ratios (LVRs) can seem like a minefield, but Jordan says they are able to be navigated with a little extra work.
“The lenders have tightened up a little bit and they are including gym memberships and Netflix subscriptions, but it is just put down as discretionary spending, it's not killing the deal completely,” says Jordan.
The bigger issue has been LVRs and the direction that banks can only have 10 percent of their lending book to homeowners with less than a 20 percent deposit.
“Even that is starting to come back a little bit now with the first home loan caps being raised so that first home buyers can borrow up to 95 percent,” says Jordan.
Regional price caps for the First Home Loan scheme have also been scrapped, opening opportunities for first home buyers but they still needed to be aware of the income caps set at under $150,000 over the last 12 months for a couple and under $95,000 if it's a single applicant with no dependents. For a single applicant with one or more dependent, the cap is also set at $150,000.
The Home Start Grant has very similar criteria. If you've been contributing to your KiwiSaver for three or more years and you meet all the other criteria, the Government will give you $3,000 to $5,000 for every year that you've paid into your KiwiSaver in total. That figure gets doubled to $10,000 if you’re buying a new build.
“The new builds are gold now. They're a lot easier to get finance on and most lenders have different criteria for a brand-new property. The grant can be more, or you might qualify for a lower interest rate,” says Jordan.
When is the right time to buy?
If you are buying your first home and plan to stay in your property for a lengthy period, anytime can be the right time to buy.
“We have people selling their homes now because they are going into retirement or downsizing, and they paid $40,000 for their house 40 years ago. Whatever they sell it for now will be considerably more than that,” says Paul.
There are a few things to consider when putting together your loan documents to ensure you are protected throughout the buying process, however.
Even if you make an offer on a home you are not committed to buying that home, provided you have the right protections in place including finance clauses that protect you from buying a home you can’t afford and building clauses that protect you from buying a home that’s structurally unsound.
Your solicitors clause is the ultimate protection, meaning any property purchased is subject to your solicitors’ approval.