Making a Start on Your Home-Owner Goals
Mon Aug. 5th 2019
Learning, saving and deciding what you really want
You dream of owning your first home, but where do you start? It may seem like an impossible goal right now, but think of it as a journey that begins with some first essential steps. We've outlined these to help you make that home-owning dream a reality.
In our goal setting blog, we had you define the kind of property you're looking for. You can narrow your search to two or three suburbs, to a specific kind of house, or a defined quantity of land. We've included the 'ideals' list again here:
Ideals or deal breakers to consider
-High rent-yield area
-Neat and tidy, requiring no major renovation work
-Well insulated, with heating
-Neighbourhood is quiet, friendly and safe
-Neighbourhood is vibrant and busy
-Neighbourhood is up and coming
-Neighbourhood is wealthy or desirable
-Near schools, amenities and/or public transport
-Attractively presented – little or no cosmetic or renovation work needed
-Needs cosmetic improvements
-Needs major renovation or repairs
-Potential for additions, subdivisions or renovation
-Fits your family now – consider storage, bathrooms, bedrooms
-Will fit your family in the future – consider storage, bathrooms, bedrooms
-Has a large backyard
-Has a small backyard
-Has no backyard
-Has a bath, the right number of bathrooms, garaging
-Near to other properties you own
-In an area you know well
-Low or no body-corporate fees
You've identified your home-ownership goals – now what?
Getting some auction smarts
It's exciting, and a bit scary, to buy your first home at an auction. If you've never been to one before, there are things you need to know before you bid.
At an auction, you'll be walking a tightrope – on the one hand, you could bid too high, win the bidding, and blow out your budget. On the other, a too-low bid will quickly be outpriced by someone else.
Here's how to get ready for your first auction.
Enlist a mortgage broker
You'll quickly learn how an auction works when you get a mortgage broker on board. Your broker offers market information, can coach you about the auction process, and help you into your first home.
Arm yourself with information
Research the sales in the area of the auction. Consult your mortgage broker, ring real estate agents, and go online to homes.co.nz for final sale prices.
You can also visit some auctions and have a look. You'll reduce the scare factor, and get a better idea of what houses are selling for and who is buying them.
Get your finance ready to go
Before bidding at an auction, it's important to organise finance – your mortgage broker can help with that too. A winning bid becomes an unconditional offer, so you must have due diligence done (titles, inspections, LIM, valuation), the auction contract to hand, and your lender ready to transfer funds for a deposit.
With pre-approval you'll also have a better idea of your borrowing limit and buying power. That way, you can go into the bidding with confidence.
Gathering your deposit
Keep your eye on the prize
To buy a home, you'll need enough money for a deposit. Don't think about how hard it will be, or worry about house prices. Focus on your goal and look for ways to gather the money you need. Here are some ideas to increase your deposit:
Capitalise on your relationship
If there's two of you, now's the time to crunch the numbers. See if you can live on one income, and squirrel the other one away. If that's possible, your nest egg will quickly grow, and you'll soon reach the amount you need.
Sell what you don't need
Do you really need two cars? How often do you get that pasta-maker out, or cook waffles? If you're cracking knees on excess furniture, some of that could go. Clear your place out, sell it all on Trade Me and add the money to your savings account – or pop it into KiwiSaver.
Make your KiwiSaver work
When buying your first house you can access your KiwiSaver funds before you retire so it's sensible to put some of your savings there. Raise the percentage going into KiwiSaver from your pay packet, too. The more you save – and earn through your retirement fund – the smaller your mortgage will be.
After three years of contributing to KiwiSaver, you could be eligible for a HomeStart grant. It's only for first-home buyers, and comes with conditions – whether you are building ($20K max), or buying an existing home ($10K max). The amount is also affected by how long you've been contributing (the longer the better).
Keep to a strict budget
First, do a thorough accounting of your ins and outs. This exercise makes it clear where you can economise – then set up a budget and stick to it.
There are ways to reduce your spending – walk more, cycle or take the bus instead of driving to work, shop for supermarket specials, drink coffee and cook at home, and always, always eat your leftovers. A digital tool can help make it easier to manage your budget – check out Pocketsmith or Budgetsimple as examples.
Ask for a pay rise and work to earn it
You might be due for a pay increase, so be brave and ask for one, or suggest to your boss that you work more hours. Long hours mean overtime, and not spending money on entertainment. Or take a second job and sock every cent you earn into savings.
Clear your 'dumb' debts
Dumb debts are things like credit cards and HPs – expensive debt you've taken out on consumer goods. Pay it off fast. Start with your credit card – clear it, and then try to avoid using it again. If it's maxed out, consider bundling it with other debts then paying it off with a personal loan – you'll be able to find one at a much lower interest rate.
If you have a rich auntie or parent who'll add your debts to her revolving credit account, you'll only pay only 5-6% interest, and save on insurance and other fees.
Feel the fear and do it anyway
There's no doubt that buying your first home is a big step to take. To realise that goal, you'll need to focus on the positive, ignore the negative, and be prepared to tighten your belt, pay down your debt and work hard.
It's also important to remember that you can get professional help – for accessing finance, making sense of the property market, coping with auctions and more. A mortgage broker's services are invaluable, and better still, they won't cost you a cent.
Thinking of starting your first-home journey? Call us now for some great advice and help.
Need some help?
Drop us a line using the form below and we'll be in touch to talk through your insurance or financial needs.