Everything a first home buyer needs to know about getting onto the property ladder

Usually has a roof, windows and a door. Like Playschool, only real life.

These are semi-attached and usually on a cross-lease or strata title. Banks are a little more nervous about town houses in larger developments so may restrict lending to 70%. They tend to be more favourable towards properties built in the 70s and less favourable towards anything built after 1985. Clearly, they don’t make them like they used to.

Apartments are increasingly popular with buyers because of the low entry prices, though they’re not viewed positively by lenders. This can make it much more difficult to get a mortgage on an apartment, but has also seen the price of apartments drop. Some banks are not lending on apartments at all anymore, so it’s worth talking to us first if you’re thinking of grabbing an inner city pad.

Apartments are a bit of a weird beast. Often banks won’t lend on the cheapest places at all because they’re too difficult to rent. For apartment like these, which tend to be less than 50sqm or leasehold, you’ll probably need a 40% deposit. Larger apartments with two or more bedrooms that are freehold will need at least 20%-30% deposit as long as you have a good stable income.

To really educate yourself on apartments, spend a night at a tired, old, cheap hotel (just take your own pillow). You’ll notice what happens to apartments that are cheaply made and not well maintained – it feels really run down, shared areas will be scruffy, views blocked by newer buildings and street noise will be very noticeable. Apartments with potential will be soundly built and mostly owner-occupied, with safe entry and exit from the building at night and great proximity to supermarkets, parks and transport.

An auction is where you get into a room and yell about buying a house. If you win, it’s considered an unconditional purchase, so you need to do all of your due diligence homework beforehand. The real estate agent will have given you a copy of the sale and purchase agreement, title and maybe the LIM report. You may need to do a building inspection and valuation. This can get a wee bit expensive if you keep bidding at auction, so it’s best to be choosy.

You’ll also need to register your interest in the auction before the day and be able to front up with a 10% deposit if you win.

Auction checklist:

• Register your interest with the agent before the day
• Agree any changes to the deposit or settlement day with the agent before the auction
• Have your solicitor check the title
• Get your finance fully approved
• Read the LIM report and do any other due diligences
• Do a building inspection or valuation (if required)
• Arrange your 10% deposit (check out our page on deposit bonds for help with this)

A tender is like dating. You put in a written offer with a specified timeframe and the vendor considers your offer alongside others. You can put conditions on the offer but this might make it less appealing than others.

A private treaty is buying by negotiation and lets you put conditions into the sale and purchase agreement.

Private sales are the same as Private Treaty but are worth covering separately because you’ll be negotiating directly with the vendor. Because no one will be managing the process and spotting the issues early there’s more chance that something will go wrong. If you buy privately you’ll need a registered valuation and should have your solicitor check the agreement before you sign. The

alternative is to insert a solicitors’ clause, which is like a Get Out of Jail Free card – if the solicitor’s not happy, you have three days to get out of the agreement.

Once you find a place you want to buy you’ll need to sign a sale and purchase agreement. This is basically just a template where you can insert your own purchase conditions.

We’ve outlined the main conditions below:

• Subject to finance – generally 5 to 10 working days
• Subject to building inspection
• Subject to LIM report
• Subject to solicitors approval – 3 working days (insert this if you are not confident about what you are signing)

Another popular condition is a due diligence clause that gives you full control on the purchase process – unsurprisingly, this isn’t nearly as popular with agents as it is with buyers. Remember though, this is a legal contract and the point of no return; once you go unconditional you’re committed to purchasing the property. It’s mostly not as ominous as that sounds.

Once you’ve signed a sale and purchase agreement we can arrange for a building inspection and valuation and have these available for you before going unconditional.

A LIM report is a document that will put you to sleep if you read it too close to bedtime.

But it's an important doc prepared by the council and is based on its property records. It will tell you whether or not the property has the right consents and a code of compliance. You’ll have to order a LIM report from your Council, which will cost around $250-$350. It often takes up to 10 days to get it too, so order as soon as you’ve signed the sale and purchase agreement. Or if you like looking at heavy documents you can check the council’s property file yourself.

Sometimes, if you're lucky the Real Estate Agent might have it and email it to you at no cost.

Your lawyer is a necessary evil in the house-buying process. You’ll find there’s a huge difference in quality of service, advice and cost from all the lawyers out there, so it’s really a question of what you need.

If personal service is important then pay extra and go to a reputable law firm.

Your lawyer will confirm that you would like to go unconditional with the vendor, check that the title of the property is clean, run through the mortgage documents with you, and settle the funds. They can help with the transfer of any relevant Natural Hazard Fund claims, too.

If you are outside of the city or overseas, they’ll courier the mortgage documents. You’ll need to sign them in front of a Justice of the Peace or Public Notary. For non-residents you don’t need to come to New Zealand to buy property – just allow enough time for us to send the paperwork back and forth.

Make sure you are up to speed with the market as it moves day-to-day. Subscribe to email alerts from Trade Me Property and Realestate.co.nz and read them when they come in. If you act, you can be ahead of the game and make sure you have that extra time to undertake the due-diligence required on a property even before the first viewing. So much researching can be online, it’s as simple as searching the address on Google.

Call up the agent and be forward, state your desire to view the property. Don’t be put off by talk of waiting to queue up with all the others at the weekend. If the property is on the market, then it should be ready to view at any time.

Acting in this forward manner may be the opposite of what people tell you in ‘not being too keen and hold your cards close’, but being assertive can be a powerful tactic, it can de-stablise the meticulously planned campaign and programme of the agent!

Another aspect of being that smarter buyer is to make sure you have all your paperwork in place and have the financial arrangements confirmed with the lender. If you take this forward, confident approach, you want to be ready to act and act quickly to make an offer. A clean and ideally unconditional offer well ahead of anyone else is the key.

Fewer properties are going to auction these days as the heat has come out of the market, the heat that caused irrational behaviour last year with short notice auctions. Today sellers are being conditioned to expect a slower pace and property taking longer to sell. So get in quick. Inspect the property, do the due diligence and get an offer on the table before the rest of the mob have even been to the open home. Be aggressive with the offer, couple that with the pace of your action and

you will have the agent telling vendors that they need to take this offer seriously – after all, you would not act so hastily if you were not serious.

The one thing that plays to your favour is the well- known expression shared with vendor by agents. “The first offer is often the best offer”. Be sure to play that card to your full advantage and let the vendor consider the classic conundrum of a “bird in the hand is worth two in the bush”.

An idea for the smarter buyer is to add a personal touch to an offer. Try writing a letter to the vendors to accompany the offer. Sure we all believe that we will always take the best offer irrespective of the circumstances, but you would be amazed how much difference a personal handwritten letter can make.

Share your desire to buy the house and explain why. People get attached to houses and it is not uncommon for owners to be keen to see the new owners as ‘like- them’ in some ways, a family to take care of the house. A touch of empathy can go a long way; and again, nothing ventured-nothing gained!

The maximum term is generally 20 years for mortgages over 80% of the purchase price and 30 years for mortgages under 80%.

Most banks allow fortnightly and monthly mortgage repayments. The best idea is to pay your mortgage as often as you’re paid – it’s not true that you’ll pay your mortgage off faster by paying fortnightly.

Interest-only terms can be for 5 or 10 years depending on the lender. Typically this option is only available to mortgages under 80% of the property value or purchase price.

Fixed rate mortgages give you certainty; you’ll know what your repayment amount is for a fixed term of between 1 and 5 years. Even if interest rates go up or down you pay the same, so you could miss out on savings, or avoid paying increases. If you repay a fixed rate early (like if you sell the house) you’ll end up having to pay early repayment fees.

• It’s better to throw all of your savings at the mortgage and have undrawn funds in a revolving credit.
• It gives you easy access to funds and can smooth your mortgage if your income is lumpy or irregular.

A mortgage is a big financial challenge. What a lot of people don’t realise is how important it is before you take one on, to take a look at what your life is expected to look like over the coming years, and plan your mortgage accordingly.

The good news is that mortgage products have become fairly flexible, as long as you plan around them properly. So if you’ve got plans to start a family and are reliant on two incomes, or dreaming of your OE in Spain for a year, we can help you figure out how to structure your mortgage around those plans.

We deal with lots of young professionals who are planning on starting a family, but whose large mortgage also means they rely on two incomes.

The key to starting a family is planning your finances in advance.

• You need to be able to cope on one income for up to 12 months. What will your monthly shortfall be?
• Take into account your higher living costs once your partner goes back to work – this will usually be around $1,500 extra a month.
• Put all of your savings into the mortgage using revolving credit. Aim to repay enough so that you can cover at least 12 months of income shortfall. With revolving credit you can access the funds you pay off at any time.
• Provided you own more than 20% of your home, you can also put your mortgage onto interest-only for a while. This will reduce repayments to cover any shortfall.

You’ll get 12 weeks paid parental leave, and if your household is earning less than $80,000 while one of you is off work, you could be entitled to Working for Families benefits too.

With the right planning, you’ll be able to stress less about your finances so you spend your energy enjoying your new family.

We can help

• develop a personal mortgage plan specifically for you. This will help you plan your finances before starting a family. We can then review your plan every year to make sure you stay on track.
• arrange life and health insurances so that you’re well covered, but not paying too much.

Used properly, an equity release mortgage (ERM) can be fantastic for people who own property and are on a limited income.

With an ERM, you can borrow against the value of your property with no need to make repayments. The interest is added to the mortgage balance and the mortgage is repaid when you vacate the property and the home is sold.

A lifetime guarantee means you can stay in your home for the rest of your life, and a no negative equity guarantee stops the mortgage ever being more than the value of your home. In simple terms, you still own your home and no one can kick you out.

We can discuss whether or not an equity release mortgage is right for you as part of our retirement plan service.

• The amount you can borrow depends on your age (at 67 you can borrow up to 22% of the property value, at 80 35%, and at 90+ 45%).
• The mortgage has a no-negative equity guarantee so that the loan balance can never exceed the value of the property.
• Establishment fees range from $695 through to $895. There is an additional charge for a property valuation (usually about $500) that can be added to the loan. It is also compulsory to get independent legal advice, which will set you back at least $500. So total up front costs are close to $2,000.
• Fixed and floating rates are available, although we don’t recommend a fixed rate for life because of the potential cost to you if you repay the loan early.

Planning for your retirement can be tricky – it’s very difficult knowing how much you have to spend every year so that your savings last your whole life. Equity release can act as the insurance buffer for your retirement savings.

Knowing that you can access equity from your home (and that property prices appreciate) you can budget to spend your other investments in the short term. You’ll have more cash to have more fun, and then, if you live longer than you expect (always good news), you can fall back on the equity in your home.

Something else to consider if you want to grow your savings but still need regular access to your money could be Squirrel Money. Squirrel Money Investors get returns ranging up to 7.5% p.a. which is paid out monthly instead of at the end of the term. You can choose to invest into home loans, construction loans and even personal loans, and we operate a reserve fund to help protect your hard earned money against Borrower default (provided the reserve fund has sufficient funds available).