Auckland First Home Buyers Need Good Advice

Compared to many places in New Zealand the house values in Auckland make it difficult for first home buyers, but it’s not all bad news.

A bit of good advice can help a lot too.

Why Do People Want To Live In Auckland?

You speak to many people from outside of Auckland and they cannot understand why people would want to live in Auckland. For those that live in Auckland many like the idea of living at the beach or in the country; however the reality is they will not shift while they are still working and then most will stay in Auckland to remain close to family.

Auckland is New Zealand’s largest city for a good reason – it is a great city to live and work in.

You can get to a beach on either the East Coast or West Coast easily, there are a lot of parks and public spaces and the city always has a number of entertainment options whether it be a musical or show, a sporting fixture or a cultural event. There is always something to do.

Auckland also has job opportunities that are just not available in smaller towns. This is the key reason that many younger people flock to the city for, and once here find it difficult to leave.

Of course with a third of the country’s population in one city there are some issues with infrastructure and particularly transport, but after many years of under-investment we have a Government that is investing heavily in transport and things are looking brighter in this regard.

Auckland House Prices Are High

With population in Auckland rising so quickly there has been pressure on housing and therefore on house prices.

Compared to the rest of New Zealand the house prices are high; however many people shifting to live in Auckland are returning from other large international cities and in comparison the house prices here seem quite reasonable.

It really is a matter of perspective, but what is the major problem for many Kiwi’s is that there seems a real disconnect between incomes and house prices.

What House Deposit Is Required?

In October 2013 the Reserve Bank of New Zealand introduced restrictions on equity (the deposit) for the banks which restricts the amount of lending they can do where there is less than 20% equity; hence the common perception now is first home buyers need to have a 20% deposit.

That perception is not entirely true.

The banks are still able to do up to 10% of the new lending they do for people with less than a 20% deposit but non-bank lenders have none of these restrictions in place and can therefore continue to do low deposit lending if it meets the other criteria.

There are also some exemptions to the rules;

  • New builds are exempt if they
  • Welcome Home Loans is a low deposit option designed to help first home buyers

There are plenty of opportunities to build a new home, but the cost can be prohibitive when you consider the cost of the sections in Auckland. It is hard to find a section for much under $300,000 and building costs even for a budget house are upwards of $1,700 per sq metre which makes most new builds over $500,000.

There Is A HomeStart Grant

If you have been contributing to KiwiSaver for 3-years you and buying your first home you are able to withdraw your contributions which goes towards your deposit, but you may also be eligible for the KiwiSaver HomeStart grant.

The KiwiSaver HomeStart grant is administered by Housing New Zealand and is a ‘grant’ (gift) to help first home buyers get started. The amount you would get is up to $5,000 per person ($10,000 per couple) or double this if building a new home.

There is certain criteria which includes having a household income of less than $120,000 pa (per couple, or $80,000 pa for a single) plus a few other restrictions – CLICK HERE to visit the website.

Plus I Can Afford The Repayments

Many of the banks websites have mortgage calculators and as mortgage brokers we hear that people have worked out that they can afford the mortgage repayments okay with the low mortgage interest rates and often that they are cheaper than what they are currently paying in rent.

The problem is that the banks and other lenders have a different method of working out the affordability.

We all understand that mortgage interest rates are very low at the moment, but none of us know what they will be in a few years’ time and for this reason the banks and other lenders will take a more conservative approach.

Each of the banks and lenders have different criteria around how they calculate what people can afford and therefore often one bank will say you cannot afford the mortgage while another bank will be quite happy that you can. Of course you could apply to each of the banks and see what the

response is, or a more efficient way is to speak to a mortgage broker that has access to all of the banks and non-banks criteria.

First Home Buyers Need Good Advice

In life we all will need to seek advice at times.

This is especially prudent when you are doing something for the very first time or doing something that has a huge financial impact. Buying your first home is one of those important things where some good advice can make a huge difference and help you avoid costly mistakes.

Of course it makes sense for first home buyers to get good advice!

But who do you ask – where do you find that “good” advice?

Most first home buyers will have friends and family that they discuss things with and this can always provide some useful advice, but often these people are not aware of everything within the current environment.

A lot of first home buyers will also research on the internet which is always a good source of advice but can also be quite confusing.

In the past people would often talk to their own bank which seems like a sensible place to go for advice; however with so many options available from the various banks and other lenders, the banks advice can be very limiting as they are not aware of the other lenders criteria or ability to offer low deposit home loans.

Today mortgage brokers are the professionals of choice for many first home buyers. Good mortgage brokers have access to various banks and non-banks, knows the criteria that will fit your situation, can offer advice on the overall process and can answer all of your questions.

At North West Mortgages Limited we are part of the Mortgage Link group and are known as Mortgage Link Auckland. Stuart Wills has been a mortgage broker since 1997 and joined Mortgage Link in 2004

Good advice is available and might save you thousands of dollars and for any first home buyers this is important.

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