My name is Stuart Wills and as an Auckland mortgage broker I’ve seen first hand how difficult it is for first home buyers to get onto the property ladder.
You would think that with low home loan interest rates it would make it easier.
Whereas renting used to be a lot cheaper than buying, the rents have been increasing so these days the mortgage repayments are often not much more than the rent. Of course there are some other costs that you need to consider when you own a house, but the gap has closed and therefore its well worth trying to buy.
There are a few advantages of owning your own home too;
- Rents will almost always increase over time, but with a mortgage you can pay it off and then your home ownership costs are quite low.
- You can make alterations to the house to suit your lifestyle and budget
- You do not have a landlord that could kick you out for any number of reasons including if they decide to sell
- It offers you and your family stability and enables you to become part of a community more easily.
It does not mean that home ownership suits everyone. Some people are in situations where owning a home may stop them doing other things and therefore renting is a better option, but whatever your situation you should consider owning a property at some point.
Home Ownership In Auckland
As an Auckland mortgage broker I will focus on Auckland for simplicity, although similar things are happening around the country.
Census results have shown that home ownership rates are dropping with data showing that under 50% of people now own or partly own the house they live in.
In the typical first home buyer age range (30 -40-years old) it’s even less with just 43% owning a home.
One of the reasons for this is the rate of house price inflation that we have seen over the past 10 years has seen the house values increase a lot quicker than incomes. This has meant that
coupled with a very tight lending market with much tighter lending criteria has left those who fall outside the box with little or no options in this Auckland Market.
Banks have tightened up lending criteria to the point where it has become a challenge for most applicants to get their mortgage applications approved. You really need to ready yourself and get your finances in order before making any loan application these days to ensure that you are putting your best foot forward and have all the documentation ready and looking good.
Auckland Mortgage Broker Suggests Ten Tips
I have complied the following tips for those first home buyers.
These are tips that may help when you are considering finance for your new home:
- Account conduct is something that the banks are now looking hard at. They will review your bank statements to ensure that you keep within your overdraft limits (if any) and will also be looking at your spending and any automatic payments etc
- Watch your spending and especially limit transactions at places like the pub, wholesaler or with the TAB or at the casino. You are better to withdraw some cash each week for these types of expenses as that way the bank cannot see what you are spending the money on and therefore it eliminates the risk of them thinking negatively.
- Consider starting a budget. I have typically said that budgets don’t really work; however there is budgeting software that we recommend called PocketSmith and the advantage is that you can upload and review your past spending (say for 3-months) so you know exactly where you have spent your money. This is a great tool as it will be obvious where you can start saving, and then you can monitor those areas of your budget. You should aim to change at least one habit and start today.
- Ensure that you have some savings as this shows that you can live within your means – you are able to pay all of your living costs and still put some money into a savings account. The banks are not so concerned about how much you are able to save, they just like to see some savings. You will find that it’s useful to have savings that you can control too as KiwiSaver and any grants have to be applied to the purchase and cannot be used to fund costs etc.
- Make regular contributions to your KiwiSaver as this is another way to show that you can save but also helps build up your deposit.
- Pay your bills on time and especially bills like for phones, electricity etc as these help your credit score.
- Pay off and close any credit cards or store cards including any that you are no longer using.
- Stop buying on credit. Even if they are offering an interest free period for the purchase it is still another financial commitment, and it’s also a habit that you will be grateful to have broken. They talk about the difference between good debt and bad debt, and in general terms good debt is okay because it is to fund an investment, a business, education (therefore your ability to earn more) or a major asset that increases in value; whereas bad debt funds a lifestyle choice and potentially something that you don’t really need.
- Be ready to disclose everything to your mortgage broker – the banks will generally find out anything that you may choose not to disclose. You are better to disclose everything to your mortgage broker and they will know how to best present things to the lender.
- Don’t give up! Getting your first home is a big step and it’s often not easy; however once you do own your own home you will look back and the effort was worth it. You are reading this because you are keen to get your own home, so if things don’t work out the way you planned then my advice is “don’t give up, review your options and be ready to try again” and with effort and determination you will get there. I know – I purchased my first home a while ago now and it wasn’t easy then either.
It might look like a lot to take in, but just try to focus on one thing at a time.
Contact A Mortgage Broker Now
It does no harm to speak with a mortgage broker now.
You may think that you need to get some things sorted out before you speak to anyone, but it does no harm to speak with a mortgage broker and get some ideas on what to work on first.
Some people will think they should go straight to the bank, but the problem is that a banker will generally only know what options that one bank can offer. This can actually be a problem for a lot of people as they get told what suits that bank, which may not be what you should be doing. As mortgage brokers we often see this where the advice may appear quite sensible, but in reality it means waiting longer to get into your first home.
Recently we had a person who had been to the bank and been told to get rid of a credit card debt first. While that may seem to make common sense, for these people it would have been better to hold that money in a savings account as the deposit was the most important thing for them.