Opinion

My wife and I recently purchased our first home and boy was it a rollercoaster ride.  You’d have thought given I spend a good portion of my life helping people buy and sell houses that the process would have been pretty straightforward for us.  However, while I understood all the legal stuff that went with buying a house, I hadn’t counted on the emotional turmoil that would be involved.  The high of finding your perfect home, closely followed by the low of realising there were 5 other interested parties all with more money than you!      

It got me thinking.  If getting your foot onto the property ladder is stressful enough for someone who understands the ins and outs of buying and selling property, what on earth must it be like for someone who is new to the process altogether?

So I thought I’d put together a list of all the things I think will help to make the whole process a little less stressful for you.  A little knowledge can make all the difference and hopefully my Top Ten MUST DOs (and some Don'ts) for Prospective House Hunters will go some way to making your home buying journey an easier one.

1. Do the Maths ($$$)

 If you don’t know exactly how much you’ve got to spend, there’s really little point even looking. Believe me, it’s not a nice feeling being told by the bank that you can’t afford what you’ve already set your heart on.

A good way of working out what you can afford is by looking at how much money you've got and doing a budget.  If you know how big a deposit you have, you can work out how much you can afford to borrow (and buy).

When you hear people talking about the Loan to Value Ratio (LVR) or 20% Deposit they are talking about the fact that usually banks will only lend 80% of the purchase price of a property. So if you want to buy a house that costs $300,000, the bank will only lend you $240,000 and you will have to come up with a 20% deposit of $60,000 from your own money.   

The earlier in the process that you can speak to your bank manager, the better. They are a great source of financial information and, if you are very nice to them, may even help you with your Kiwisaver and FirstHome Grant forms (see below).  They will also be able to talk to you about your options if you don't have a 20% deposit.

2. Do look at Kiwisaver, FirstHome Grants and Gifts

As well as your own savings, you can use your Kiwisaver, a Housing New Zealand FirstHome Grant or a gift from family to put towards the deposit.

If you know you’ll be using your Kiwisaver or applying for a FirstHome Grant, get pre-approval for these as early on as possible.  The processing times for both can be quite long and the last thing you want to happen is for settlement to be delayed because you haven’t got these funds in time.  Any agreement you sign will also need to include a finance condition (see below) if you haven’t got pre-approval on your finance.

Your lawyer and/or your bank manager should be able to help with the various application forms.

3. Do speak to someone who has done it before  

If you have friends or family who have recently been through the home buying process, talk to them. They will be a great source of tips and advice.

4. Do get to know the Real Estate Agents

If an agent knows what you’re looking for, they will often be able to give you a heads up that a property matching your requirements is coming up for sale (meaning you can beat the crowds).

Go in, introduce yourself and tell them what you’re after. They won’t bite!

5. Don’t sign anything until you have spoken to your lawyer    

If you find a property that you like and you’re keen to make an offer, remember, DON’T SIGN ANYTHING UNTIL YOUR LAWYER HAS CHECKED IT. Once you sign an agreement, depending on its terms, there are only limited circumstances in which you can get out of it.

Most lawyers will not charge you for looking over the Agreement before you sign and even if they do, the small fee they might charge could save you $1,000s, especially if they spot something wrong.

Your solicitor may advise you to include certain clauses (conditions) in the agreement which will enable you to cancel the agreement if you are unhappy with aspects of the property or if certain things don’t happen. For instance, you might want to have a builder look through the property and prepare a report for you. If the builder finds something wrong with the property during his inspection you could renegotiate the purchase price or use the condition to cancel the agreement. Or you may still be waiting to hear back from your bank with confirmation that they are happy to lend to you. If the bank does not approve your finance, this condition will allow you to cancel the agreement.

Your solicitor will also be able to check the title to the property to see whether there are any interests registered on it which might affect how you can use and enjoy the property (such as easements or land covenants).  If the right condition has been included, you can cancel the agreement if your solicitor isn't happy.

6. Don’t forget about the costs of buying a house 

Solicitors, valuers, builders, District Councils - they all charge fees for providing the services you need to buy your house.   You could easily spend a couple of grand on professional service fees. Make sure you include these costs in your budget.

7. Don’t forget about the costs of owning a house

If you’re currently renting and have budgeted on the basis that you’re paying $300 a week on rent, so you’ll be able to afford $300 a week on mortgage repayments, don’t forget about all the extra costs that accompany home ownership.   Council rates, insurance, on-going maintenance (costs you don’t have to worry about when you rent), will soon start adding up. 

8. Don’t over stretch yourself 

If you cancel the Sky subscription, sell one of the cars, eat beans on toast for a year, then yes, you might (just) be able to afford the mortgage repayments on the ‘forever home’ you’ve just seen. But is it worth it?

There is no point living in your perfect house, if you can’t afford to live.

9. Do make a Will and think about Life Insurance etc.    

I know, it’s the last thing you want to think about once you’ve moved in, but I’m afraid it’s something you have to do.

You now own the most expensive asset of your life and there are a number of pretty expensive obligations that go with it. What happens to that asset when you die, and who is responsible for fulfilling those expensive obligations if you’re not around, is something that you must think about now.

It is now cheap and easy to make a Will, so there is really no excuse for you not to have one. Speak to your solicitor or have a look at one of the online tool kits.

If you are the main breadwinner, who’s going to pay the mortgage if, due to illness, accident, or death, you can’t earn a wage? Your loved one is already having a pretty tough time dealing with your injury, redundancy or death, without having to worry about the bank selling the house because the mortgage isn’t being paid. A financial advisor or your bank are great sources of info on life insurance and income protection and remember, there are policies to suit all budgets.

10. Do, every now and again, take a deep breath…  

Don’t be too disheartened by the ones that get away and don’t let desperation trick you into buying something that you know isn’t right for you.

For every house you miss out on, there will be a bigger, better, even more fantastic house waiting for you around the corner. I promise.      

Happy house hunting people!

Richard