Everyone knows buying your first home is a big investment. We hate to be the bearers of bad news, but first home buyers can often be surprised that there are quite a few additional costs involved beyond the purchase price. Prepare yourself for paying for professional services during the house-hunting phase, mortgage repayments (of course), home renovation and repair bills, ongoing fees, council rates and the cost of keeping your place comfortable.
Let’s look at how you can factor these things into your finances and still feel the glow of new home ownership.
At the start, spending your commute scrolling through houses for sale and wandering through strangers’ homes at the weekend are very low-cost activities. Once you start looking seriously, it’s a smart idea to pay for professional help to ensure you’ve got as much information about a property as possible before you make any big decisions.
Buying a house is a legal transaction that requires a lot of paperwork. It’s important to get a lawyer or conveyancer who can explain exactly what you’re signing up for. You should also ask them to look at the record of title for the property, which shows exactly where the boundaries are and has a record of information about your rights and restrictions. Fees for these services can vary but you can expect to pay around $250 - $300 for them to look at the title and make sure the property is kosher. We can give recommendations for a lawyer, or if you prefer to do your own research and shop around, check out the Law Society’s list of New Zealand property lawyers.
If you’re keen on a property, it’s worth hiring a qualified building inspector to check it out. Again, these costs can vary but expect to pay around $300 - $700, depending on what's involved. It’s a necessary cost which is for your peace of mind, and an investment for the future — getting a report done now could prevent expensive surprises and pain later on. Building inspectors can also estimate how much renovations, repairs and ongoing maintenance will cost you.
Some sellers or real estate agents will offer you a pre-prepared report for a property, but we recommend that you get your own one done from someone you trust. Check out the New Zealand Institute of Building Surveyors or the Building Officials Institute of New Zealand to find an inspector in your area.
Don’t forget that you need to check out information held by the local council about the property. A Land Information Memorandum (usually called a LIM) is a summary of all the current property information held by the council, such as the rates, consent for any work done on the property and if there are any known land issues, such as subsidence or flooding. Information can be added to a LIM over time — if you are offered one by a seller or real estate agent, make sure it’s up to date. Expect to pay $300 - $400 for a LIM, or you can pay more if you need it urgently, within 48 hours or so.
You can also ask to see the council file on your property, which can contain information that isn’t in the LIM. Costs for this vary too.
Well, this one is a given. A mortgage repayment is the regular payment you make to the bank to repay what they’re lending to you. This is calculated by the total loan amount (the house price minus the deposit you paid), with interest added on.
There are a couple of key things to bear in mind:
Here’s where the number-crunching comes in. If you’re a bit lost about where to start, check out our mortgage calculator to help you estimate how much you can afford to borrow or what your repayments will be. It might feel scary, but it’s better to do this sooner rather than later.
Don’t forget to factor in changing interest rates. Banks will test your affordability against a much higher rate than what they’re at to make sure you can manage if rates do go up. Our mortgage calculator takes this into account, and bases the calculations on a whopping 7.50 per cent. We don’t see rates going that high any time soon, but that is what the banks will test you on. In the happy event that they go down, you can talk to your adviser about ways to pay off your loan faster. Remember too that you can shop around when it comes to finding a lender - this is why it’s great to use a mortgage adviser to help you get the best interest rates. You can check out mortgagerates.co.nz to compare current rates.
As anyone who has ever dabbled in a bit of DIY will tell you, the great Kiwi tradition of ‘doing a place up’ can be more expensive than you think. The key to surviving renovations with your bank account intact is to know what you’re getting yourself in for. Don’t make the mistake of buying a property thinking you’ll be able to whiz through a reno job like they do on TV home shows — do some solid research first about what needs to be done, how long it will take and how much it may cost.
Set a realistic budget and stay a step ahead by factoring in at least 10 to 15 per cent extra for any hiccups along the way.
If there’s a long list of jobs to tackle, prioritise the ones that will have the biggest impact on the home’s overall comfort and value (insulation and heating are good places to start). Experts also recommend living in a property for a while before you start smashing through walls or planning new extensions. If you want to add value, consider improving the kitchen and/or bathroom, or making outdoor space more attractive by adding a patio or deck.
Here at Squirrel we have a Homeowners Loan to help Kiwis fund the work they want to do to their home — it’s the fastest way to borrow for the house, without having to talk to the bank.
If you’re buying your first home, the first thing you probably want to do is treat yourself to new stuff to make those Pinterest ideas come to life. But before you go crazy with the credit card, think carefully about the long game. Also, you won’t need to buy everything new: the sale and purchase agreement (the legal document you signed when you made the offer) should have details of what chattels (such as dishwashers, stoves, curtains, light fittings etc) are included in the sale. Some people are lucky enough to be landed with the existing fridge or washing machine!
There’s no rule that says you need to fill a house with furniture the minute you move in. It’s a better idea to work out what you need once you’re in (though, obviously, beds are pretty crucial for a comfortable first night). If you’re on a budget, think laterally when it comes to finding cheap furniture. TradeMe, op shops, furniture outlet stores and sites like Freecycle can be total treasure troves if you’re looking for bargains.
When you buy a home, you really become a proper adult and you need to be prepared for a series of ongoing bills to start turning up the minute you move in. Factor the following into your household budget so you’re not caught out:
These are the biggest ongoing costs for most homeowners every year. Each council charges different rates, which go towards paying for things like roads, rubbish collection, public parks and reserves, stormwater drains and libraries. Check your council website to find out how much rates will cost in your area. You can often opt to pay them by direct debit on a regular basis which makes them more manageable than in several lump sums.
If you own in an apartment or unit, you’ll have to pay body corporate fees to cover the upkeep of the building and its facilities, plus the cost of power in common areas and insurance, among other things. If you’re looking to buy an apartment or unit, make sure you ask about the body corporate fees and for information about how the property is run. You can find out more about body corporate fees (and your rights and responsibilities as an owner) on the Settled.govt.nz website.
Tip: for existing apartments, we often recommend reading (and getting your solicitor to read) the latest body corporate minutes before you buy. These may highlight any ongoing maintenance issues or repairs associated with the property.
Buying a house is the biggest purchase most people will ever make, so it makes sense to protect yourself, your family and your biggest asset from any worst-case scenarios. As well as home and contents insurance, you’ll need to consider mortgage insurance (which covers your mortgage in the event of serious illness leaving you unable to work) or life insurance. Most lenders require you to have house insurance in place as part of any mortgage agreement.
Even if you’re buying a brand-new property or building from scratch, your home will need a fair amount of TLC over time. You can keep on top of the little jobs yourself, but for big stuff like roofing, exterior repainting and sorting out leaks or plumbing issues, you’ll probably need to get the professionals in. It’s a good idea to plan for these extra costs early on and squirrel a bit of cash away for when you need it.
Now that you’re schooled up on the extra costs that come with being a first home buyer, you can prepare. Remember part of home ownership is about balancing your mortgage repayments with all those other costs, but it’s also a matter of balancing those with the lifestyle you want to lead. If you do it right, you should be able to take care of the adulty stuff while still participating in Sunday brunch plans. We’d recommend you organise your budget accordingly, and have separate accounts for the different types of costs.
Want to know more? We’re here to help. We can help you find out where to look for your first home, work out how much you can borrow and provide the answers to all those other tricky questions. We’ve even got a free First Home Buyers Guide which you can download from here. Read more about how Squirrel helps first home buyers.