Last year, I ticked off one of my bucket list goals: buy a freehold property. And by tick off, I mean literally – it’s long been written in my Bucket List Journal, alongside goals like ‘Go to Japan’, ‘Try anti-gravity yoga’, ‘Go to Tomorrowland in Belgium’ and ‘Fly a plane’. Needless to say, it was a dream come true!
After I shared the news, I got asked more or less the same questions from friends & acquaintances. So today I’d love to share my home buying journey, as a recount of my personal experience – ie. I’m not writing this from a place of trying to give financial advice, but from human to human to share what it was all like.
The first thing I did was educate myself on KiwiSaver and how it can help you to buy your first home. I researched the eligibility criteria and house caps, then went ahead and applied for the HomeStart Grant. Since I’d been contributing to KiwiSaver for over three years, I was confident I’d be accepted. So when I received my pre-approval, I was ecstatic!
But, as an individual, it was tough for me to find a house within the Auckland house caps – at the time, $600,000 for an existing property, or $650,000 for a new build. I was devastated after doing endless searches on Trade Me and never finding any houses that weren’t in the middle of nowhere or apartments with Bodycorps.
Speaking of Trade Me, I immediately subscribed to their email lists. You can do this by first doing a search – simply choose your region, local district, price range and property type. After, you want to click “Save This Search”, then, “Email me every day / every 3 days / every week”. Voila!
I repeated this email subscription process everywhere, including Property Press where you can subscribe to the latest listings in the area you’re looking.
I’d looked for a year or so before I gave up, then started looking again. This time, after months of searching on the Shore, I’d fallen in love with multiple properties. I loved a modern unit in Hillcrest, but ultimately decided the tandem garage (different from a double garage) was a huge inconvenience. I also loved a chic little unit in Milford, stylishly furnished with white & grey decor with a nice front and back yard.
How I found my house was serendipity. On the same day I went to Milford, I almost wasn’t going to stop by another property – one in Glenfield. But very luckily, I did. And it wasn’t a unit this time, it was a freestanding house!
Being unfurnished, it wasn’t as immediately attractive at first glance, so I wasn’t instantly as in love with it as I was with the previous properties. But in reality, it was absolutely wonderful: two generous, spacious bedrooms with an open lounge & dining area. A carport that provides cover to the house. A kitchen with a lot of drawers, shelves & cupboards. (I found out later that a previous owner was a cabinet maker.) A front yard and deck, big enough to fit an outdoor dining table and outdoor lounge set. Additionally it was in a fantastic location close to shops, food, bars, doctors, dentists, pharmacies, public transport & more!
At this point, I still wasn’t 100% sure on which house I’d go for, but it was time to prepare for something else: the mortgage.
The first thing I did was play around on my bank’s mortgage calculator. Your bank will have one, that they may call a home loan calculator. It works out approximately how much you could borrow based on your income, assets, debts & expenses, plus what your repayments could be. I experimented multiple times to get an accurate idea.
I called my bank to ask for an appointment, asking, “I’d like to find out if I can get a mortgage – if I can, how much I can borrow, and if I can’t, what I need to be able to.” At the time, I also had debt, which I disclosed straight away.
I was taken care of by the friendliest, most down to earth banking advisor. She assured me my debt wasn’t actually very much (what a relief). Then she sent me an email, with an application form which I completed and sent back with documents.
The next day she got back to me with good news: a conditional approval! Also called ‘pre-approval’, this allowed me to look at houses within a certain price range. I remember her saying, “This is great news, I am so excited for you!” This genuine customer service made a huge difference and is clearly something I still remember and appreciate about one of the most significant purchases of my life.
It’s notable that the amount I could borrow was fairly accurate to the amount the online home loan calculator had told me, give or take a few thousand. I was impressed!
After deciding on the house, it was time to negotiate. My house wasn’t on sale as auction, but had an asking price. I’d cross-referenced different websites to get a rough figure of what the house was worth today, so I knew what was reasonable. That night, the real estate agent went back and forth between me and the vendor while we negotiated the price. I increased my offer twice before I made my third and final offer. The vendor decided to sleep on it, which made that night the most nerve-wracking night ever.
But the next day came – and they accepted!
Now it was on a conditional offer and I was to set the conditions. It’s up to you what you choose, but for me it was 1) a building inspection report and 2) a meth test. These were to be done within a certain time frame, which could be 7 days, 10 days or any other time frame agreed between you and the vendor.
Both passed satisfactorily, which meant that it was now UNCONDITIONAL!!
I went into the bank to get the mortgage set up and finalised. Personally I preferred the certainty and ability to budget with a fixed mortgage rather than floating mortgage, while half fixed, half floating was also an option. A huge bonus is that I’m still allowed to make extra repayments whenever I want, and I have taken advantage of this, incurring early repayment costs of only cents! So far, it’s worked out very well.
The bank’s condition was that we purchased home insurance, which was straightforward as I worked for an insurance company at the time, had insured thousands of homes myself, and got a discount. A lot of people are confused as to what to insure their home for. It’s not how much you bought the house for, but the rebuilding cost – how much you would need to rebuild the house if it was (for example) lost in a fire, excluding land value. You can get a professional quality surveyor or find an online calculator – what you want is not a market valuation but a rebuild cost valuation.
The good news is, the rebuilding cost is usually significantly less than the purchase price – keeping your insurance premiums low. You also earn discounts for having a securely monitored alarm, having an owner occupied property, and combining with your contents & car insurance (all of which I did, of course)!
The deposit was paid (mine was 10%) while the settlement date had been decided earlier (on the night of negotiation). On the day, the rest of the funds was paid from the bank to my solicitor, which was then paid to the vendor’s solicitor. The official Sale & Purchase Agreement was emailed through, naming me as the owner of the house in North Auckland. What was left: meet up with the real estate agent to get the keys and arrange for power, water & internet.
In the end, I didn’t actually use my KiwiSaver HomeStart Grant because the price was above the house caps, but what I did make good use of was my KiwiSaver First Home Withdrawal. You can withdraw your entire balance minus $1000, and that’s exactly what I did – starting my retirement savings almost all over again, but hey… Worth it!
Here are just a few things I wish I’d done earlier:
+ Saved more to borrow less – a pretty obvious but crucial one, especially with interest to take into account!
+ Had a higher Kiwisaver contribution rate. I was on the default of 3%, and since last year have had it increased it to the maximum of 8%.
+ Been more patient and practical – it takes time to find The One. Consider all factors and look at the details (ceilings, walls, window sills etc) and bring your family/friends/partner with you to get a second opinion. You might notice different things the other person didn’t see!
+ Considered a buyer’s agent – like a real estate agent, except they work for you and liaise on your behalf – potentially saving you many time consuming drives, phone calls, negotiations and headaches.
I hope that this was helpful to you! Check out the resources I used below:
+ Sorted Mortgage Calculator – I used my own bank’s one, but to be impartial I’ll link this one, which is just as helpful. It’s a good idea to shop around the banks to see if they have any special promotional rates or rewards currently going – from what I’ve seen, you could score a holiday, earn extra cashback or score a discounted banking + insurance package!
+ Electric Kiwi – Their customer service was amazing. Electric Kiwi, an independent and 100% online company, got my power up and running – remotely – in less than 30 minutes after a quick online chat.
+ Settled.govt.nz – Brought to you by the Real Estate Authority (REA), this is a new website that guides New Zealanders through buying or selling your home. I discovered this from my volunteer work at Citizens Advice Bureau, where volunteers like me are happy to help you with any questions you may have about the home buying process – or just about anything, really!
If you are an aspiring homeowner, good luck, and I wish you all the best!
This article was originally published on my personal LinkedIn.