Help with getting onto the NZ property ladder.
Buying your first home is one of life’s biggest moments and a milestone you’ll never forget. The difference between gliding easily along the pathway and hitting a bumpy road is preparation guided by good information.
It takes a team to help you buy your first house, so right from the start you need to pick your team players. Here’s who might be on your team:
To provide expert advice, help you choose a lender, organise pre-approval, and ensure your loan is finalised once you’ve bought your home.
To check the property title, look for pitfalls and make sure the transaction goes through on settlement day.
To confirm the property is insurable (proof of house insurance will be required by your home loan provider).
To confirm the property’s current market value (a home loan requirement).
To check the property you want to buy and provide a comprehensive report about its condition and risks.
Who might be able to help you get your deposit together and act as guarantor for your home loan.
To cheer you on and offer advice based on their experience.
We haven’t included ‘real estate agent’ here, because you usually don’t get to choose your agent. You will need to work with the agent the vendor (property seller) has chosen. While agents must live up to REINZ code of conduct guidelines, their first priority is the vendor’s objectives – something to keep in mind during every communication.
The amount of cash you can contribute to paying for your house is known as the deposit. It usually needs to be 20% of the value of the property you want to buy. Your deposit usually has several components. The most common options are explained here:
If you’ve been with KiwiSaver for at least three years, you may be able to withdraw most of your KiwiSaver funds to put towards your first home. Read more about KiwiSaver first home withdrawals.
If you’ve been contributing at least the minimum amount to KiwiSaver for three years or more, or an approved employer scheme, you might be eligible for a First Home Grant. The amount you could receive depends on the total time you’ve been regularly paying into KiwiSaver. Find out more about a First Home Grant.
There are several ways your family can help you out. They can offer money towards the home deposit; use their property as equity to support your loan; lend you money to buy your home; offset your loan with their bank accounts; or agree to be a parent guarantor. Read more about these options.
Kiwibuild is a government scheme that puts eligible New Zealanders into newly-built homes. To have a chance with KiwiBuild you need to be a first home buyer who is a New Zealand citizen, permanent resident or resident visa holder. For more information visit the KiwiBuild website.
To help people with a low deposit into their first home, the government offers a product called ‘First Home Loan’ through a selected group of lenders. Read our article about buying a first home with a 5% deposit.
Before you start looking at real estate listings, it helps to work out how much you could comfortably borrow and get an idea of what your mortgage repayments will be. Armed with this insight, you’ll be in a better position to talk to a lender. The ideas below are generalised. To get personalised advice for your circumstances, talk to a mortgage adviser.
Understanding how you use money every month helps you to prepare for a home loan application. It also lets you see how you could potentially trim your spending, so that you can build a bigger deposit and comfortably afford mortgage repayments. It takes about 30 minutes to use our Budget Planner.
Figuring out how much you could potentially borrow depends on the amount of debt you could easily service. This is determined by your income, spending patterns and number of dependents. Our Borrowing Power calculator lets you work out an approximate figure for how much you could borrow.
Once you buy your first home you’ll no longer be paying rent. Instead you’ll be repaying a home loan. To see how much extra per month this means, have a play with our Mortgage Repayments Calculator.
If you want to feel confident when you make an offer or bid at an auction, home loan pre-approval is a must. It shouldn’t be difficult to get if you already know how much deposit you can gather up and what you need for day-to-day living expenses.
Pre-approval is written acknowledgement from your chosen lender that you can borrow an agreed amount, provided you meet certain conditions. Pre-approval letters are valid for a limited time, e.g. 90 days.
Typically, pre-approval takes between five and seven working days. However, it could take up to two weeks if the lender is experiencing high demand. Your mortgage adviser can give you a clearer idea of pre-approval timings for the lender you have selected.
If it looks like your pre-approval letter will expire before you buy a property, you can request an extension – usually two months. You can generally do this twice before you have to begin a new pre-approval.
While you can deal directly with a bank, we recommend you talk to an adviser who works with a range of lenders. Don’t delay – some first home buyers are experiencing long wait times for pre-approval.
Getting pre-approval requires proof of income (payslips or bank statements), a budget (use our Budget Planner), a list of debts (personal loans, credit cards, overdrafts), evidence of your deposit (savings account statement, KiwiSaver balance, letter confirming gift of money from your parents), two forms of identification (driver license, passport), proof of address (recent utility bill) and information about the property you want to buy. For more information about homework you need to do, see our article about preparing for a meeting with your mortgage broker.
A systematic approach to finding the right home will prevent time-wasting and frustration. Here’s a system you can try:
Make a list of the things you absolutely must have, then a second list of nice-to-haves. Criteria for your home can include size of floor area, number of bedrooms and bathrooms, indoor-outdoor flow, potential for adding value, landscape features, age, building materials and architectural style.
Make a list of the suburbs or towns that offer the things you need. Consider things like commuting distance, public transport, schools, shopping, recreational opportunities, and distance to family and friends.
You need a realistic budget based on your income, typical spending patterns and deposit amount. Refer to Tab 3 on how to use our calculators.
Most homes for sale are listed on Trade Me Property and sites like realestate.co.nz. It also helps to look at homes.co.nz to understand estimated values for the locations you’re considering.
When you’re trawling through the real estate listings, remember to use your list of criteria to decide whether to view a home or not. Don’t waste time looking at homes you can’t afford.
Before you make an offer on a home or decide to bid at an auction, talk to your mortgage adviser to plan the way forward. Your adviser can help you to:
Confirm the property is within your pre-approval limits.
Review your repayment strategy. For example, you can work out how you would cope if you’re affected by job loss, interest rate rises, pregnancy, council rate increases, utility increases and general cost of living increases. Develop a worse-case-scenario to see how you would survive.
Ask your adviser’s advice for negotiating a sale or bidding at auction. Mortgage advisers gather a lot of information while they’re working with property buyers, so they have a good understanding of how deals are made.
For more information on what an adviser can do for you, read our article: What does a mortgage broker do?
If you don’t already have a mortgage adviser, we work with some of the best.
Researching the strengths and weaknesses of your target property is an important step before you make an offer or go to an auction. This is also the time to alert some other members of your support team, i.e. lawyer, building inspector and valuer. Keep in mind that their time costs money, so only ask for title checks, building inspections and valuations if you’re absolutely certain you want the property and it’s within your price range.
Your research can include:
Ask your broker to recommend a building inspection provider. You can also ask friends and family for recommendations or search online. The inspection report might raise issues that require further investigation. For example, the home might be at risk of being a ‘leaky building’, it might be made with dodgy building materials or it could need repair work.
You should find out whether the property is at risk from natural hazards, including flooding, earthquakes, hydrothermal activity and landslips. To get this information, order a land information memorandum (LIM) report from the relevant council. Most NZ councils will charge somewhere between $200 and $400 for a LIM. It’s wise to show the LIM report to your lawyer, because they might notice issues that haven’t occurred to you.
The government’s settled.co.nz website recommends you get your lawyer or conveyancer to search the record of title for the property you’re buying. It has a record of things that can have an impact on what you can do with the property and any access you need to provide to others.
A registered valuation for the property can help with negotiations and getting full loan approval. But valuations can cost up to $1000 – or even more. For this reason, some home buyers save getting a registered valuation until after they’ve bought a property. You need to use a valuer approved by your lender – ask them for a list.
Everything you discover should be carefully considered, because it will influence your opinion of the property’s value. It’s not unlike buying a second-hand car – how much you’re prepared to pay depends on overall condition, identified risks and the cost of getting problems fixed.
Homes in New Zealand are usually sold using one of these methods:
Asking price: This is usually negotiable. The real estate agent will act as a go-between for negotiations with the vendor (seller).
By negotiation: There’s no asking price, so you can make any offer you like. Your offer is usually based on what you think the property is worth, with some leeway for negotiation. ‘Expressions of interest’ is another way vendors invite offers.
Auction: On auction day, the property is sold to the buyer with the highest bid after the vendor's reserve price is reached. If the reserve price isn’t reached, the highest bidder gets first chance to negotiate.
Tender: You make an offer in writing before a specific deadline. The vendor considers all the offers and makes a decision. With this type of sale process, you won’t know what others are offering.
From websites like homes.co.nz you’ll have an idea of what the home is worth in the current market. While it’s good to listen to the agent about what sort of offer to make, it’s your call about where to start negotiations. Keep in mind that the agent wants to get the highest possible price for their customer (the vendor), so their advice isn’t really neutral. You can make your offer conditional or unconditional.
Offers are made on a ‘sale and purchase agreement’ – a legally binding contract between you and the seller.
A conditional offer is an offer to purchase a property that is subject to certain conditions being met prior to the completion of the sale. These conditions may include having to secure finance, a building inspection or your solicitors’ approval. Once you have satisfied all the conditions within the specified timeframe your offer will be unconditional, and you can complete the sale.
Your offer is unconditional when there are no conditions attached therefore you’re legally bound to buy the property if the vendor signs the sale and purchase agreement. An unconditional offer is also called a ‘clean offer’ because it has no strings attached. Even with a lower price, an unconditional offer is often highly attractive to a vendor.
Know how high you can bid and stick to your plan. If you bid beyond your budget, there’s a chance you won’t get the finance you need to follow through with the sale. Sales that happen under the hammer are unconditional (refer above), so it’s sensible to get a building inspection and council report before auction day.
The sale and purchase agreement will specify a deposit that’s payable when both parties have signed the agreement. This is usually 5% or 10% of the purchase price. If buying at auction you must pay your deposit on the fall of the hammer so it pays to have this organised ahead of time.
Once your home purchase has gone unconditional, it’s time to get the final details sorted. These include:
It’s important to check that a house is insurable before you make an offer, because your lender will require your home to be insured. Some properties come with risks that insurers won’t want to take on. For example, if you want to buy a property close to the high tide mark, you might not be offered insurance cover for flooding. After the sale has gone through, get back in touch with your insurer to organise cover. Read more about getting house cover on insurances.co.nz.
House transactions are usually organised by conveyancing lawyers. Your lawyer will oversee the legal process of transferring the ownership of property from the vendor to you. They also ensure payment for the property happens on time. Some home buyers also get their lawyer to check the sale and purchase agreement before they make an offer.
If you obtained pre-approval before buying the home, finalising your home loan should be straightforward. In addition to the information you provided for pre-approval your lender will need a copy of the sale and purchase agreement, a registered valuation for the property and proof that the home is insurable.
Throughout the first home buying process you’ll encounter words you might not understand and documents you’ve never heard of. Here’s a quick 101 course to help with that.
Body corporate: A group made of all the owners within a unit titled property. Boundary: The line that marks the edges of a property. Building Code: Legislation that outlines the minimum requirements for buildings, to ensure they are safe and healthy. Capital value (CV): The probably price that would be paid for a property at the date of council valuation. Certificate of insurance: Proof of insurance cover. Code of Compliance Certificate (CCC): A formal statement issued under section 95 of the Building Act 2004 that building work carried out under a building consent complies with that building consent. Conditional agreement: An agreement or contract conditional that depends on a specific event, such as getting finance approved for receiving a favourable building inspection. Conveyancing: The transfer of legal ownership of a property from one person to another. Deposit: The amount you (the buyer) contribute to the purchase price of a property. Fixed interest rate: An interest rate that won’t change during the period (term) you choose. Floating interest rate: An interest rate that fluctuates as interest rates in the wider market change. Guarantor: A person who agrees to be responsible for the debt of another person. For example, a parent can be a guarantor for their child’s home loan. Interest-only loan: A loan that requires you to pay only the interest charged, not the amount borrowed. Leaky home: A building where moisture gets between the outside of the house (the cladding) and the inside walls. Buildings prone to leaking were mostly built between the late 1980s and the mid-2000s. Land information memorandum (LIM): A summary of information that a council holds on a property. It may include information about potential for flooding, landslip, erosion, subsidence and hazardous substances. Low equity margin (LEM): An amount added to the interest rate of a home loan if the lender is concerned about risk or if you have a deposit of less than 20%. Mortgage: An agreement between you and a lender that gives the lender the right to claim the property if you fail to meet the terms of your loan. Possession date: The date you are entitled to move into the home you have purchased. Pre-approval: An indication that your lender has agreed to lend you an amount of money, provided certain conditions are met. Registered valuation: The amount a registered valuer thinks a property will sell for in the current market. Sale & purchase agreement: A legally-binding contract between you and the seller of a property. Settlement date: The date when you pay for your property in full and it becomes yours. Term: The amount of time it will take for a loan to be completely paid off. Title search: The examination of public records to determine and confirm a property’s legal ownership. Usually done by your conveyancing lawyer. Unconditional: An offer without any conditions attached. When you make an unconditional offer and it’s accepted, you are legally required to complete the purchase.
When you’re moving towards owning your first home, questions pop up all the time. Usually these are about getting your deposit together, finding a home loan provider and ensuring settlement happens without hitches. Here’s an assortment of the questions we hear most often, along with answers you can trust.
If you have a deposit that’s more than 5% of the home’s purchase price, you might be eligible for a First Home Loan backed by Kāinga Ora. Read our article about buying a first home with a 5% deposit. Another option is to see if you qualify for the First Home Grant, which could bump up your deposit. See our guide about first home loan grants. If neither of these options works for you, some lenders offer low deposit home loans.
Using the ‘bank of mum and dad’ has become a solid trend in recent years. There are several ways your family can help you out. They can offer money towards the home deposit; use their property as equity to support your loan; lend you money to buy your home; offset your loan with their bank accounts; or agree to be a parent guarantor. Read more about these options.
It’s always better to start as soon as you can, because lenders’ turnaround times vary. If the lender is low on staff or experiencing high demand, don’t expect quick service. Pre-approval can sometimes be given in just a few days, but it pays to allow extra time for full approval. If you’re working with a mortgage adviser, they will be able to indicate how long you might have to wait.
The answer to this question changes like the wind. If you want the best deal going, we recommend you work with a mortgage adviser who knows the current lending market inside out. Connect to an expert home loan adviser.
Getting an interest-only loan for your first home could be a challenge, but there are lenders out there who might consider it. The term for an interest-only loan is usually a year or two, but it can be up to five. At the end of the term you have to repay the entire original amount of the loan. In most cases this is achieved by switching to an ordinary principal-plus-interest loan. Read our article about interest-only loans.
Banks and finance companies are very careful about who they lend money to, because they definitely don’t want you to default on your mortgage payments – it’s not good for you and it’s not good for them. If your circumstances change and your income takes a big hit, your lender may be able to restructure your loan to make it more affordable. Don’t panic! Just talk to your lender or mortgage adviser.
Buying a first property is easier and less stressful when you do your homework before you hit the market. We’ve covered all the basics here, to give you a total understanding of the way forward.
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During the planning stage of buying your first home, using calculators is an almost-daily activity. Our calculators help you to plan a budget, work out how much you might be able to borrow, and put a ballpark number on your monthly or fortnightly home loan repayments.
Budgeting is the best way to steer your finances, stay in control and prepare for managing your mortgage.
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Work out how much you could borrow based on some quick questions about your current financial situation.
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Get an estimate of what your repayments could be, based on your mortgage amount, term and interest rate.
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Visit our Learning Centre for carefully-researched articles that are relevant to your situation. Our resources are organised into categories – first home buyer, next home buyer, property investing, refinancing, building and general news. Authors include independent economist Tony Alexander and experts from the NZ home loan industry.
