NOBODY LIKES PAYING RENT

Seeing my hard-earned money paying someone else’s mortgage wasn’t going to start my journey to financial freedom.

However, amidst all the noise about interest rates and home values, it would have been easy to shy away from my first home purchase right then. In reality, though, it was still a good time to buy, especially since I didn't have the burden of selling a home in the same market.

With house prices coming down, being fully informed about all my financial and purchasing options became crucial. To guide me on this journey, I explored some insights to help navigate my first home-buying experience.

Dollars and Sense

Saving a 20% deposit seemed daunting; with the cost of living, scraping together $160,000 felt nearly impossible. While some fortunate friends tapped into the bank of Mum and Dad (a great option if available), I was committed to earning my own way.

There were a couple of potential avenues to reach my deposit goal without the full 20%:

Recently, house price caps were significantly raised for those eligible for the First Home Grant, opening up properties across the country to more buyers.

Kainga Ora expanded their First Home Loans to a broader range of individuals, with an additional 2,500 loans available. The removal of house price caps for both new and existing homes under this scheme was a game-changer, although income caps for borrowers remained.

Finding the deposit for my first home was a struggle, as most lenders demanded a minimum 20% deposit. However, with a First Home Loan, I only needed 5%, making it much easier to step into my first home. These loans, backed by Kāinga Ora and issued by selected lenders, allowed me to qualify for loans that otherwise wouldn't meet standard lending criteria.

Income Cap:

• Annual income of no more than $95,000 (before tax) for an individual buyer, or
• Income of no more than $150,000 (before tax) for an individual buyer with dependents, or
• Combined income of no more than $150,000 (before tax) for two or more buyers, regardless of dependents.

Minimum Deposit:

• 5% of the purchase price of the desired house.

Once I managed to pool my deposit, convincing lenders that I could manage the mortgage within my budget became the next challenge, requiring careful planning and disciplined budgeting.

Opting for a new build with a robust fixed-price contract made sense for several reasons. It minimized surprise maintenance costs, offered additional lending benefits and grant access where applicable, and ensured the property held its value. Still, preparation was key.

Step One: Eliminate any unused debt or debt capacity, such as store or HP cards with unused facilities, to improve my credit score.

Step Two: Stay realistic. My first home might not be my dream home, but starting with a new build was a solid beginning. While I might not buy a home a short drive from the city center, I also wouldn’t spend weekends fixing gutters and wood rot!

Step Three: Research diligently. Find a lender offering the best deal for my profile. Some lenders provided special interest rates for new builds and first-time buyers, with previous banking history no longer holding the sway it once did.

Step Four: Live within my budget for three months, incorporating mortgage payments. This involved cutting unnecessary spending to demonstrate to banks that I could handle potential interest rate increases (often stress-tested at just over 7% by most banks).

Building My Dreams

The advantages of a first-home build were clear, including financial benefits from grants and loans, along with favorable conditions that spared me expensive and time-consuming renovations.

As a first-time homeowner, I knew I’d be working hard to meet my mortgage obligations. After a long workweek, I wanted to enjoy life with friends and family, not laboring over repairs and renovations. New builds meant no surprises. Classic Builders offered a comprehensive Aftercare service and a 10-year warranty, ensuring peace of mind from day one.

Steph George – A case study

Steph George is living proof that a little sacrifice can go a very long way. At just 27 years old Steph is building her first home with Classic Builders in Rotorua and Steph isn’t a ‘trustafarian’ with a mortgage funded by the bank of Mum and Dad. Steph’s home ownership is the result of some savvy and tenacious research and some old-fashioned hard work.

As a young person starting your career or possibly returning from an OE, it can feel like saving a house deposit is out of reach. It isn’t easy but it is possible. If you are willing to take the short-term pain for the long-term gain, it can be the step ahead you make that secures your financial future.

‘My Mum and Dad have always taught us to have goals and I realised quite early on that it didn’t matter what car you drive or what material things you have if you don’t have a safe, warm house to put them!’

Steph works as a youth support worker and has also taken on a a role she has had before in a local bar. Seventy-hour weeks are part of the norm but knowing this is a short-term solution to realise her dreams has made it manageable. Also boarding at home has been a lot cheaper than flatting.

‘It hasn’t always been easy, I had been set back a few times when I contacted the bank to see what I needed to do to get to where I wanted to be….I pushed my Kiwisaver input to the highest contribution level because if you don’t receive it, you don’t miss it and I was saving $300 a week. I was paying rent to my parents but my outgoings were minimal, I am semi-grateful to Covid just for the fact that I wasn’t missing out on going out!’

Steph belongs to the Ngati Whakaue Iwi who have launched an affordable housing scheme in the Wharenui Rise development in Rotorua in conjunction with Classic Builders. This programme comes with some restrictions and criteria however Steph still spent five years saving the 20% deposit and was fortunate enough to win the ballot and was allocated one of the ten available houses on the last ballot.

‘It’s amazing as there are also two other women in the development also buying their first homes, including a solo Mum, all in their twenties. I’m buzzing for them as much as I am myself…..it’s really cool to know my neighbours are likeminded people who have worked super hard to get into their homes too,’

Steph’s advice to those looking to enter the property market is to ‘just keep going and to explore all of the options’. Having faced lots of brick walls and rejection from lenders, her tenacity paid off and she was able to access a mortgage thanks to Kiwibank, forging a great relationship with the mortgage manager who provided solutions to barriers and ended up finding a workable outcome.

Later this year Steph will move into her own brand-new home, in her family’s suburb with new appliances, no maintenance and an asset she can come home to each night and enjoy.