NICK COWDY / Residential Sales Consultant, Principal Agent

Purchasing a home is a significant milestone, filled with anticipation and dreams of finding the perfect place to call your own. However, the process can also be daunting, especially when it comes to securing the necessary finances. This guide is designed to help you understand and prepare for the financial aspects of buying a property in New Zealand.

1. Saving for a Deposit

The first step in your home-buying journey is saving for a deposit. Typically, lenders require a 20% deposit, meaning for a $500,000 home, you’ll need $100,000 upfront. However, there are various government schemes available to assist first-time buyers, such as the Welcome Home Loan, which may require only a 10% deposit, or $50,000 for a property of the same value.

It’s important to differentiate between the bank deposit and the sales deposit. The bank deposit is the amount you need to save before securing a loan, while the sales deposit, usually around 10% of the purchase price, is paid to the real estate agent when you sign the sale and purchase agreement.

2. Understanding Mortgages

A mortgage, also known as a home loan, is the money borrowed from a lender to purchase a property. This loan is secured against the property itself. The total amount you repay will exceed the initial loan amount due to interest charges, which accrue over the life of the mortgage. To minimise costs, aim to save a larger deposit and repay the mortgage as quickly as possible.

Before committing to a mortgage, spend time researching different options. Consider factors such as interest rates, repayment terms, and fees. Websites like Sorted.org.nz offer useful resources for understanding your mortgage options.

3. Pre-Approval: A Smart Step

Obtaining conditional pre-approval for your mortgage is a wise move before house hunting. Pre-approval provides a clear picture of your budget, allows you to act swiftly when you find the right property, and signals to sellers that you are a serious buyer. It is especially important if you plan to purchase a home at auction.

4. Government Assistance for First-Time Buyers

There are several government initiatives that can help first-time home buyers, including:

  • KiwiSaver First-Home Withdrawal: Eligible KiwiSaver members can withdraw funds to purchase their first home. This option is available to those who have contributed to KiwiSaver for at least three years.
  • KiwiBuild: This program aims to increase the supply of affordable housing for first-time buyers. Eligibility depends on household income and other factors.
  • First Home Loan: Backed by Kāinga Ora, this loan may allow eligible buyers to purchase a home with just a 5% deposit.
  • Kāinga Whenua Loan: Available to Māori buyers wishing to build or relocate homes on ancestral land.
  • Tenant Home Ownership: Kāinga Ora tenants may have the option to buy their state house.

 5. Additional Costs to Consider

Beyond the deposit and mortgage, there are other expenses to budget for, including:

  • Legal and conveyancing fees
  • Building and council reports (LIM report, building inspection)
  • Bridging finance costs
  • Moving expenses and utility reconnections
  • Ongoing costs such as maintenance, rates, insurance, and body corporate fees (for properties in complexes)

Remember, even if a property purchase falls through, you’ll still need to cover these costs.

Understanding the financial aspects of buying a home is crucial to making informed decisions. Take the time to explore all your options, seek professional advice, and prepare thoroughly for your journey to homeownership.