Housing has long been a hot topic for individuals and families who are still renting after so many years, particularly in New Zealand. Although it’s more economical to rent initially before buying a house, wouldn’t it be nice to be able to afford a property right now?
The past generations had their fair share of acquiring houses even at a young age. Real estate was significantly less expensive, and the average household income makes it realistic for young professionals to own a home.
“If you want a house, you must save. You must work. You must ensure that you make good decisions and life choices, it just doesn’t come to you overnight,” a Wellington councillor shared.
As easy as it is to say, it’s actually way harder to do.
How much of your salary should be spent on your mortgage? How much deposit should you put down?
It's advised that first-time homebuyers save at least $250,000 for the 20% down payment on their home. Because housing prices vary by location, saving more funds for your first upfront payment will increase your chances of getting a loan and closing the deal.
Meanwhile, for those who would like to buy a house outside of the major cities such as Dunedin and Christchurch, you will only need around $90,000 for your home deposit.
As for income, you can always adjust your usual billings and utilities to increase your savings for a home. If you commit 30% of your take-home money to your mortgage, that suggests you need to be earning at least $100,000 (or higher) each year before tax.
Before you sign that contract, be sure you have more than enough money for your first down payment. Aim for 20%, hire a broker and make them work for you. Try not to get emotionally involved as much as possible. Determine your budget and look for places that are within your means.
Instead of paying for pre-purchase inspections, you can employ a builder to evaluate the property to see if there are any damaged pipes or other issues.
In some cases, cheap houses turn out to be a bad and costly investment due to pipeline concerns, roof damage, improper electrical wiring, and other factors. Paint and plaster are expensive, especially if you need to restore the entire property before moving in.
Pro tip: If you do buy such a property, don't make any alterations to it for at least 6 months, except to fix leaks and draughts. This will give you time to figure out which ones need replacing or total repairing.
If you currently contribute more than 3% of your salary to Kiwisaver, you can reduce it to the minimum to increase your take-home pay. You can use the money you save to pay off your mortgage, or use it for the down payment on a home.
Assess how much your monthly repayments are using a mortgage calculator. If you want to borrow $500,000 for 25 years with a 3-year fixed term at 2.45% rate, you pay a monthly repayment of $2,231 depending on the mortgage provider you choose.
There are several banks and lending institutions that you can select from in New Zealand, all of which offer different benefits and flexibility according to your needs and budget.
In other countries where there isn't as much of a safety net, having an emergency fund is considered a necessity for most employees. In New Zealand, on the other hand, if you're in financial trouble, there are services like WINZ that can help you get enough money to cover your mortgage payments. If you do set aside money for unexpected expenses, you can reduce it to $5 to $10 per month to make room for home savings.
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