The Kiwi dream is to one day turn the key in the front door of your own home, purchased with your hard-earned dollars. This becomes a haven for you to decorate as you wish as you invest in your long-term future.
Saving for a deposit on your first home is something which occupies the minds of many young people in their 20s and 30s.
It’s not just the savings and a mortgage which can put that key in your hand faster.
If you have regularly contributed to KiwiSaver you may be eligible for both a KiwiSaver First Home Grant and the chance to withdraw all or most of your accumulated KiwiSaver funds to put towards the cost of your first home. (You must leave a balance of $1,000 in your KiwiSaver fund.)
Also, the KiwiSaver First Home Grant can allow additional funds for a new property compared with an existing or older home when the price caps are met for your local area.
In the Whangarei area and Christchurch this can make a $200,000 difference in the value cap for first-home buyers purchasing a new build; while in Hamilton and Tauranga the value cap differential is $75,000, and in the South Waikato it is $100,000. (These totals were adjusted by the Government in the 2022 Budget.)
In a situation when every cent counts, this is an extra consideration in favour of a new build first home.
Other benefits to choosing a new home as your first home is the lack of maintenance giving you more leisure time to enjoy.
Also, there is extra cosiness in a new build as they employ the latest building technology and advancements in heating and ventilation for warm, dry and sustainable homes no matter the weather outside.
From a new house plan, you can configure the home as you wish. For some, that will be an ensuite, while for others a media room is top of the wish list.
The decoration and colour scheme is entirely up to you – from the tap fittings to the walls, you can let your creative design flair run free.
When you’re considering your mortgage, of course your biggest aim is to pay the loan off in the shortest time possible and to incur the least amount of interest.
A Generation Homes housing research paper has recently shown that some first-home buyers lack understanding of the difference between mortgage brokers and a bank.
Unfortunately, this knowledge gap may unnecessarily narrow your lending options in terms of both the chances of your applications being accepted and the rates you would have to pay.
The bank where you have always banked may be your best option and may give you the best interest rate – but you need to check that is the case by comparing with other lenders, especially in these current times when a quarter of mortgage applications may be turned down for credit reasons.
A mortgage broker is an independent advisor who can introduce you to a variety of financial institutions and it is that variety which may get your application across the line.
Think of the mortgage broker as a matchmaker for you and your best home loan!
The Generation Homes survey also showed there was room for improvement in people’s understanding of how interest rates work.
Of those who had purchased a home, 35% said they did not have a clear understanding of interest rates when they started house hunting.
There’s lots of resources available online to increase your understanding of mortgages and how they work, so devote some time to research this. Start with your bank’s website.
It’s crucial to know such things as the difference monthly or fortnightly payments can make and if there is a penalty payment if you wish to pay off the loan earlier than agreed.
Knowing when you can make a lump sum payment on your loan to reduce your principal is important if you receive an inheritance or are lucky enough to win lotto.
A one-off bonus from work is another situation when you may need to pay break costs to reduce your loan.
For information on the KiwiSaver withdrawal application and First Home Grant, check out the brochure on this link.
* Recently Generation Homes supported a research paper which involved a survey of 217 Kiwis aged 20-35 years to gain an understanding of their knowledge of buying a house.
The respondents lived all over the country and were split between those who had purchased a home, those who had not purchased but had considered purchasing, and those who had not considered a first-home purchase.
Of the respondents, 75% were female, while 25% were male. If they had not bought already, most people’s living situation was flatting and saving. Among the respondents, 55% had not purchased a home.