Buying a First Home? Heres What You Need to Know
Mortgage Express
Mortgage Resource
2 years ago
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Falling house prices in some parts of New Zealand could spell good news for first home buyers who have been struggling to save a big enough deposit to enter the property market. However, although previously locked out due to affordability, further interest rate rises and the threat of a recession could make getting finance and servicing a mortgage that much harder. Before you step onto the property ladder, here’s how to prepare for the journey ahead.

1. Work out how much deposit you need

The ideal deposit for buying a home in New Zealand – and getting your mortgage financed – is 20 per cent of the purchase price. Some lenders may consider home loan applications from borrowers with less than 20 per cent deposit. However, banks are limited to doing just 10 per cent of their lending to low deposit borrowers, so your best chance of success lies in saving a bigger deposit.

The size of your deposit can also impact the interest rate and other costs you may be charged by your lender. The bigger your deposit, the more opportunity you have to negotiate on things like interest rate and cashback offers. What’s more, by saving a 20 per cent deposit, you avoid paying Lenders’ Mortgage Insurance (LMI).

The good news is your deposit can be made up of a range of saving options, including:

And, if you’re eligible, you could get Government help from the First Home Loan scheme, in which first home buyers may be able to borrower enough to buy a first home with just 5 per cent deposit.

2. Find out how much you could borrow

When it comes to working out how much you can borrow, lenders use a range of criteria including:

  • The number of applicants, dependents and purpose of the loan
  • Your income including salary, wages, investment income or any other income
  • Your living expenses and day-to-day payments from your bank accounts
  • Your debt including credit card limits, personal or car loan repayments, maintenance, student loans, etc.

To improve your borrowing capacity, focus on either increasing your income or decreasing your expenses. And a note about online mortgage calculators: while these may be useful in calculating a rough estimate of the amount you could potentially borrow, if you are shopping around for a home loan it’s worthwhile talking to a Mortgage Express branded adviser to discuss your borrowing capacity and lending options. 

3. Get mortgage pre-approval

Being pre-approved for finance puts you in the best position to move quickly when you do find your ideal home, because you’ll already have completed all of the necessary paperwork.

To apply for mortgage pre-approval, we’ll need the following information from you:

  • 3 of your latest payslips or the last two years of your financial statements prepared by an accountant if you’re self-employed
  • 3 Months’ worth of bank statements for the account that most of your income goes into, and from which you do your day-to-day spending and pay bills and living expenses
  • 3 Months’ worth of credit card statements (for each credit card) or any other debt such as hire purchases, personal loans, car loans or any other debt that you may be paying back.
  • A copy of your valid passport, residency or driver’s license
  • A rough budget of what you spend each month - a summary of your income and outgoings
  • Confirmation of your deposit which could be made up of your own savings, KiwiSaver, grants or subsidies, a cash gift or a family guarantor 

Working with a Mortgage Express branded mortgage adviser means you’ll have a team on your side who will help you secure pre-approval from the right lender, negotiate on interest rates and finance terms with the lender, and help you navigate the often complicated processes in buying a first home.

If you’d like to find out more about buying your first home, contact Mortgage Express today to connect with a mortgage adviser in your area.