Are you on the hunt for your first home – or maybe just started thinking about it? Embarking on your journey to home ownership can be exciting and daunting at the same time. But with the help of a SHARE mortgage adviser, you can secure the home loan you need for the property of your dreams.
Here’s a step-by-step guide to becoming a homeowner.
Step 1. Save a deposit
As most lenders require a minimum deposit of 20 per cent of the house price, getting into your first home takes careful planning and budgeting. For example, if you’re looking at buying a property worth $700,000, you’ll need to save at least $140,000.
The bigger the deposit you put towards your first home, the less you’ll pay in interest over time. Depending on your situation, you might be able to borrow more than 80 per cent of the home’s value, but lenders usually charge more for these low-deposit loans (for example, they may offer you a higher interest rate).
Contact one of our SHARE mortgage advisers: we can help you run the numbers.
Step 2. Get your mortgage pre-approved to know how much you can borrow
Understanding your borrowing power is key to working out your budget.
Of course, using lenders’ calculators is a starting point, but they can only provide a rough estimate. If you’re looking for a more accurate figure, we strongly recommend getting your mortgage pre-approved by one or more lenders.
This is something that our SHARE mortgage advisers can help you with. We will review your personal circumstances and financial picture, including your income and debt. Then, we’ll make a recommendation as to what lenders may be most appropriate, and will liaise with them on your behalf to get things started.
Step 3. Research the property market
When it comes to choosing the right property, websites like Trade Me’s Property Insights and Homes.co.nz (to name a couple of examples) are invaluable sources of information. You can use them to research a specific area or street, and get insights on the latest market values, sold prices and rateable valuations.
Once again, while these are valid tools, it’s important not to rely too much on their rough estimates. Before choosing your first home, make sure you get familiar with the area, attend open homes and learn as much as possible about the property. We’ll come to all this in a second.
Step 4. Narrow your target
Now that you’ve identified a realistic budget and a couple of potential suburbs, it’s time to think about the key characteristics that your first home should have.
What property types are you most interested in? How many bedrooms? How important is your outdoor area? What are your non-negotiables and deal-breakers?
Keep in mind that your first home doesn’t have to be your final home: the key thing is to find something that suits your lifestyle and your budget, and allows you to take that all-important first step on the property ladder.
Step 5. Ask the experts
To make your home-buying journey as smooth as possible, and depending on your situation, you may come into contact with experts in different fields, including: mortgage advisers, insurance advisers, builders, accountants (if you’re self-employed), and property valuers.
Also, we strongly recommend getting legal advice at every step of the process, and certainly before signing any contracts. Buying a home comes with a lot of paperwork and the finest detail can have a big impact on the outcome.
If you need help finding the right professionals to work with, please get in touch: our SHARE mortgage advisers can put you in contact with the reputable people in your area.
Step 6. Attend as many open homes as possible
This is the fun part, but let’s be honest – it can also be exhausting. So be prepared to do a lot of legwork. Attending different open homes can give you a clear understanding of what the market offers, and most importantly, what you like or don’t like.
Consider letting two or three real estate agents know what you’re looking for: it’s in their best interest (and yours) to keep you informed on any suitable properties coming to market.
Step 7. Found a house? Get a Building Report
So, you’ve found a property that you like, the lender has approved it and, as far as you can see, it fits all the important criteria. But what if there’s more than meets the eye?
While real estate agents have a duty to tell prospective buyers everything they know about a property, they may not know everything. Behind the seemingly perfect walls or hidden under the floor, there may be damage, mould, cracks and other structural issues.
That’s why getting a Building Report is so important. Each report usually costs around $1,000, but the peace it provides is worth every cent – especially when you’re about to sign up for such a long-term financial commitment. In the meantime, also make sure that your lawyer checks any contracts or council reports for problematic clauses or potential issues.
Step 8. Time to make an offer
Once you’ve researched the property and determined that you want to proceed with the purchase, it’s time to make an offer on it. Depending on the type of sale, you may have to negotiate the price with the vendor or put down the highest bid.
The question is, how much should you offer?
Short answer: whatever fits comfortably within your budget. The amount you choose to put forward will depend on what you’re comfortable to repay, rather than what the lender offers you.
For example, based on your financial situation, your lender may give you a pre-approval for $900,000. This is the maximum amount they are willing to lend you, but you don’t have to borrow the entire sum. Get in touch with a SHARE mortgage adviser to get an estimate of mortgage repayments, based on different interest rates and home loan sizes.
While it’s not mandatory, you might also want to ask a professional property valuer to assess your home’s true value, keeping in mind that offers may always be higher or lower than that.
Step 9. Get a final approval
Your offer can be unconditional or conditional, and it needs to be submitted in writing through the vendor’s agent.
In a tight property market and in multi-offer situations, an unconditional offer can give you a big advantage over other buyers, as vendors can close the deal right away. But you need to be 100 per cent sure that you want to proceed with the purchase. Building reports, unconditional mortgage pre-approval, contracts and LIM reports – these should all be sorted before making an unconditional offer. It’s a binding contract and there’s no turning back.
Conditional offers allow you to work towards meeting certain conditions. Most people include a finance clause, to ensure they can null the agreement should the lender pull out. Many also insert a Building Report clause, stating that the defects found should be rectified by the vendor, or allowing the buyer to negotiate a lower price.
If all goes to plan, your mortgage will get the final approval and your offer will become unconditional.
Step 10. Structure your mortgage
Home loans are not one-size-fits-all, and that’s why SHARE mortgage advisers take the time to understand your situation, and negotiate with the lender on your behalf to ensure you access the most appropriate conditions.
From choosing the right structure and interest rates through to paying off your mortgage faster and refinancing if needed, we will be in your corner every step of the way.
Step 11. The house is yours: Make sure you protect it
On settlement day, you will finally receive the keys to your first home. It’s an exciting moment and one that you’ll remember forever. While you enjoy that milestone feeling, start thinking about how to protect your brand-new asset.
And that’s where our SHARE insurance advisers come into the picture. Whether you’re looking to protect the contents of your home, the home itself, or your family’s ability to repay the mortgage, we can help you design an all-encompassing insurance plan.
Ready to kickstart your house hunt? Keep SHARE in mind.
Disclaimer: Please note that the content provided in these articles is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your specific situation. Before making any decisions based on the information provided in these articles, please use your discretion and seek independent advice from your SHARE Financial Adviser.