If you're thinking of buying your first home, here are 10 important things to remember before you make the big spend.
1. Think about where your deposit is coming from
Slotting money into a bank account is the usual way to save but there are other ways to pull a deposit together. You may be able to withdraw some or all of your KiwiSaver savings to put towards buying your first home. Parents may also be willing to go guarantor or write a cheque.
2. Get rid of other debt
Banks prefer that you have no debt when applying for a mortgage, with student loans being a standard exception. Most people would be wise to take steps to get rid of hire purchases or personal loans. And once you've got the mortgage, say no to easy credit as this will make life hard.
3. Before you go house hunting, get a mortgage pre-approval
New home buyers need to be able to act quickly and decisively when the right house comes along. Getting a mortgage pre-approval beforehand helps you do this.
4. Don’t bite off more than you can chew
Just because you get a mortgage pre-approval for a certain amount, doesn't mean you have to use all of it! Interest rates maybe low now but they will increase again in the future. The more you borrow, the more it will hurt when rates go up, so know your limits.
5. Open homes - go hard, go fast
Every first home buyer wants to make sure they're buying a house that represents good value for money. The only way to do this is to view lots of property in a short space of time. It can be hard work but well worth it.
6. Be realistic
Your first home will most likely not be your dream home. Adjust your expectations, think about the features that are really important to you and then focus on finding a house that ticks 75% of the boxes.
7. Make your offer “subject to”
An offer that is “conditional” gives you the chance to check things out before fully committing to purchasing a house. Two common conditions are the purchaser secures suitable finance and gets a builder’s report. Ten working days should be enough time to sort the finances and get a property inspection done.
8. Stick to a budget
Once you've got into your first home, then it's time to start thinking about how to pay off your mortgage faster. Paying off a little bit extra each week is worth the effort. Set yourself a weekly budget, plan your spending and stick to it. With a budget, financial freedom is yours for the taking.
9. Get insurance
Once you've got the house the only sensible thing left to do is to insure yourself. How would you pay the mortgage if your income dried up? How would you rebuild the house if a fire destroyed it? Insurance, that's how. Get some.
10. Seek professional advice
The journey to first home ownership can be stressful especially if you are planning to go it alone. Get a team of experts around you such as a mortgage broker, lawyer, property inspector, property valuer and insurance broker. Their knowledge and advice will make the process simpler.
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