Banks and lenders have very specific policies around lending to first home buyers and the pricing of their home loans can vary substantially.
If you are a first home buyer and find the right home loan, you should investigate both your options and government grants and entitlements you may be eligible for. With interest rates falling and property becoming more affordable, first home buyers are in the best buying position they have ever been in.
First Home Buyer Assistance
KiwiSaver is a voluntary work-based savings scheme designed to utilise the existing PAYE (pay as you earn) tax system. KiwiSaver includes a first home deposit subsidy which, after three years of saving, provides a first home deposit subsidy of $1,000 per year, up to a maximum of $5,000.
Considerations in securing your first home loan
- As a first home buyer, you will need to consider:
- What assistance is available to you as a first home buyer
- Suitable mortgage options for first time home buyers
- The size of your deposit and where you will source this from
- The fees and charges associated with purchasing a property
- Undertaking thorough research on the property market
- And of course finding a good mortgage broker, accountant, financial planner and solicitor
- Current interest rate climate
Home Loans for First Home Buyers
There are a number types of mortgage options particularly suited to or advertised as suitable for first home buyers, including loans which allow a part of full guarantee by a third party. These loans are not the only types available for first home buyers, you will also be able to choose from a range of standard residential home loans.
There are also schemes out there called “Rent to Buy” and we get asked about them regularly. All we can suggest is that you seek legal advice before signing anything. We are not saying they are not worth it, but make sure you do your homework first on the risks and what your obligations and options are.
If you ever entered into a “Rent to Buy” agreement, you will need to make sure at some stage during the agreement term, that you are able to borrow the money from the bank at some stage to take over ownership and the mortgage. You should at least find out whether a bank would approve you based on your current income and expenditure.
Just because you can pay the rent, this does not mean the bank will approve you financially so check with us first.
How much deposit do I need to purchase my first home?
Traditionally a 20% deposit was required in order to secure a home loan, leaving many first home buyers in today’s market under the impression they need to have saved a deposit before they can secure a home loan, but flexible bank lending policies mean there are now also a number of alternatives and supplements to having the cash in the bank already. Options for sourcing the deposit you need, include:
- Traditional savings
- Gifted money
- Equity or guarantees from family members
- Fees and charges for first home loans
There is a range of fees and charges relating to first home loans, including bank and lender charges, government and statutory charges and conveyancing fees, property valuations. For a complete overview of fees and charges associated with your home loan, contact us about this.