First home buyers: how to beat the market
Is now the time to enter the market?
The last two years have seen some notable changes occurring and for us at Loan Market Metro, the biggest increase has been in first home buyer applications.
Investor tax regulations have changed, house prices have increased 16.1% in a year (the biggest since 2006), and post-lockdown open homes and auctions have seen huge increases in attendance.
We wouldn’t blame you if you believed now is not the best time. But, in fact, it is.
We’re starting to see a decrease in investors appearing at auctions and open homes. While the market is busy, we think it's starting to favour first home buyers. The interest rates are at historical lows and the deposit is as little as 5% - that’s $25,00 for a $500k home.
What may put some off is the journey; how do I begin and complete such a huge step in my life?
Let’s break down some of our tried and tested approaches our current clients have mastered.
How to build a deposit
We’ve written about these steps plenty of times. We created an article series specifically for doing this last year that answered the question “can I afford to buy a home”, buying a home in a different housing market, and how to prepare a budget. We even did a webinar on it to break down the journey.
Kiwisaver is a popular and great start. This is still available, helping the majority of our clients get on the property ladder. If you’ve been a Kiwisaver customer for at least the last three years, the government could give you up to $5,000 towards an older, existing home, or up to $10,000 towards a newly built home or land to build a new home on.
The mum and dad bank is always an option too and more often than not, comes without interest! There are things to be aware of in this circumstance though:
- Pros - Ability to act faster: Rather than spending years saving for a deposit, parental help means young Kiwis can get into the market sooner.
- Lower or no interest rates: Parents can offer the kids a better deal than other lenders.
- Flexibility: Mum and Dad can be more flexible than banks when it comes to repayments.
- Cons - Financial strain: Parents may feel obliged to help, as a result putting themselves under financial pressure.
- Tense relationships: Family relationships can suffer, especially if help is given to one child over another.
- Change in circumstances: Unforeseen job losses, family breakups or change in financial circumstances can all have an impact on what initially seemed like a good plan.
We provided more on this subject here.
How much are you really spending on coffee? Another key step is a sturdy and reliable spreadsheet. The simple act of listing out what you bring in monthly vs your outgoings will help you visualise what you could comfortably afford (this helps get quicker turn arounds when we seek a pre-approval). While many people will tell you “mortgage repayments can be cheaper than rent”, that’s only partially true.
As a homeowner, you have more insurance requirements, rates and overheads. But, the act of listing out your finances can help you see exactly what goes out a month. Paying $250 for coffee a month probably isn’t that critical? Netflix and Disney+? Make a choice! These things add up and once removed, can showcase a truer fund for your repayments.
Three key tips for your next steps
1 - Have a pre-approval in place
When you see me and the team, we’ll work first and foremost on that pre-approval. Getting a figure and a good bank on your side allows you to go house hunting - but in a more enjoyable way. Once that’s in place, you don’t have to worry, you have a figure, you can add that back into your spreadsheet and you’ll arrive at auctions and open homes with a competitive edge.
2 - Keep active with open homes
Turn open home viewings into a habit but one that becomes an easy job each weekend. A good coffee, attitude and agenda for the day give you an edge around your attitude at open homes. It’s frustrating to see some clients who had their heart set on one property miss out, so have a good few options.
3 - Keep in touch with a Mortgage Advisor
We’re here to ensure you have the right information, even when you’re going to view a home you’re interested in. We can help you ask the right questions and make the right move when it matters. Did we mention this service is free?
How a Mortgage Advisor works
Simply put, we act on your behalf and ensure you have a point of contact from introduction, right through to putting your key in your new front door. Even then, we’ll continue to stay in touch and make sure important assets like your home and life insurance are covered as well as keeping you updated with interest rates and changes to repayment structures.
You don’t pay us, the banks do.
Having a financial expert alongside for the whole ride is completely free for you. We break down the information and provide you with our professional knowledge to make the right decision. So, why wouldn’t you get one?
At Loan Market Metro, we’ve have many banks and lenders on our books. We have good, solid relationships with them built over eight years. But we don’t need to approach them all at once, we can study your unique situation, then present the right lenders for you.
Our team has grown as one of the top reviewed mortgage advisors in the country (you can see our reviews here).
If you’re not sure, or prefer to chat before committing to anything, just give me a call - obligation free - and you can get to know what we do.
03 343 2335 or +64 27 886 4934
Good luck out there, and we’ll hear from you soon.