Owning a home is a goal that most kiwi’s have here in New Zealand – we love our large 3 – 4 bedroom family homes, with a bit of land to kick a ball around and enough room to park our car, bikes and scooters. For some of us, buying our first home is an achievable goal we feel empowered to be working towards, but for others it seems like an impossible target.

However you are feeling, there are steps you can take in planning and working towards your goals so that you can achieve your dreams.

Most of us don’t have a spare $700,000+ just sitting in our banks, so one of the biggest hurdles in buying a house is securing a mortgage to pay for it.  The process may seem daunting, but with careful consideration and the right resources, you can make informed decisions that align with your financial goals.

In this guide, we’ll go through some of the important aspects to think about in applying for a mortgage in New Zealand, highlighting key considerations and the potential benefits of utilising a good mortgage broker.

Understanding the Basics:

Before delving into the application process, it’s important to understand the fundamentals of mortgages in New Zealand.

Assessing your financial situation to determine how much you can afford to borrow is a great first step. With rising costs of houses in New Zealand and high interest rates, banks are not loaning as much as they were priorly and it can be much harder to get approval for a mortgage. Using a mortgage calculator such as this one can help to see how much you might be able to borrow.

Once you’ve got an idea on how much you need to borrow and have your deposit saved, your next step might be to get prior approval from your bank. This will allow you to make conditional offers on homes that suit you.

When it comes time to draw down on your mortgage, you’ll want to think about how you structure it. There are different kinds of mortgages available, such as fixed-rate and floating-rate. Fixed rate mortgages are locked in for a set period of time for a set interest percentage. Floating rates give more flexibility around repayments but the mortgage rate can fluctuate both up and down. There are other kinds of mortgages too, such as revolving credit which allows you to draw down on the funds you’ve paid off.

It’s worth talking to your banker or mortgage broker about the right mortgage structure for your situation, to provide both flexibility in paying it off faster and security around ensuring you can continue to afford mortgage repayments.

Credit History and Financial Preparation:

A strong credit history is a cornerstone of a successful mortgage application. Lenders will scrutinise your financial stability, so try to minimise outstanding debts, get rid of any credit cards or store cards that you don’t absolutely have to have – even if they are paid off they will still count towards your debt.

Try and minimise unnecessary purchases such as coffees and takeaways for a few months as these will also negatively impact your financial position.

Saving for a Deposit:

Saving saving saving! Yes, this is where the real mahi comes in. You’ll need a decent deposit to buy a house in New Zealand – generally around 20% of the cost of the house.

The earlier you start saving, the more you’ll have come buying time.

Luckily in New Zealand you can also make use of your KiwiSaver savings to buy your first home. There are rules around this, and your mortgage broker or banker can help point you in the right direction to apply to use it, but here are also some steps to go through:

1. Eligibility Check: Before considering using your KiwiSaver funds for a home purchase, ensure that you meet the eligibility criteria. To be eligible, you must have been a KiwiSaver member for at least three years, be a first-time homebuyer, and intend to live in the property as your primary residence.
2. Check Your KiwiSaver Balance: Log in to your KiwiSaver account or contact your KiwiSaver provider to check your account balance. The amount you can withdraw depends on various factors, including your contribution history, investment returns, and whether you are buying an existing home or building a new one.
3. Apply for a KiwiSaver HomeStart Grant: In addition to accessing your KiwiSaver funds, you may be eligible for a HomeStart Grant, which is a government subsidy designed to assist first-home buyers. The grant amount depends on your income, the location of the property, and whether you’re buying an existing home or building a new one. Applications for the HomeStart Grant are made through your KiwiSaver provider.
4. Select a KiwiSaver Withdrawal Option: KiwiSaver members have two options for withdrawing funds to purchase a home:
   • KiwiSaver First-Home Withdrawal: This allows you to withdraw your contributions, your employer’s contributions, and any investment returns. However, you must leave a minimum balance of $1,000 in your KiwiSaver account.
   • KiwiSaver HomeStart Grant Withdrawal: This option allows you to withdraw the HomeStart Grant amount (if eligible) along with your KiwiSaver funds.
5. Coordinate with Your Solicitor and KiwiSaver Provider: Engage with your solicitor and KiwiSaver provider to facilitate the withdrawal process. Your solicitor will ensure that the necessary legalities are met, while your KiwiSaver provider will guide you through the application and withdrawal procedures.
6. Provide the Required Documentation: Be prepared to provide documentation such as the Sale and Purchase Agreement, proof of identity, and confirmation of your KiwiSaver account details. Your KiwiSaver provider will outline the specific documents required for your application.
7. Withdrawal and Settlement: Once your application is approved, the funds will be transferred to your solicitor’s trust account. These funds, along with your HomeStart Grant (if applicable) and any other savings, will contribute towards the purchase of your first home.

Choosing the Right Mortgage Broker:

If you haven’t used a mortgage broker before, or aren’t sure what they are, then this is your lucky day. Using a mortgage broker will save you time, money and also increase your chances of getting a mortgage. And their advice is entirely free to you!

Your mortgage broker will act as an intermediary between you and the lender, offering access to a wide range of mortgage products and negotiating competitive rates on your behalf.

Chat to friends and family, ask your real estate agent, or research a reputable broker with a proven track record online, and chat with a few to find a good fit for you.

Benefits of Using a Mortgage Broker:

1. Expertise and Guidance: Mortgage brokers are well-versed in the intricacies of the New Zealand mortgage market. They can provide personalized advice based on your financial situation and goals.
2. Access to a Variety of Lenders: Brokers have access to a network of lenders, including banks and non-bank lenders, increasing your chances of finding a mortgage product that suits your needs.
3. Time and Cost Savings: Brokers can expedite the application process by handling paperwork, liaising with lenders, and ensuring all requirements are met. This not only saves time but you may also be able to loan more or save money.
4. Negotiation Skills: Brokers have the expertise to negotiate competitive interest rates and favorable terms on your behalf, potentially saving you money over the life of your mortgage.

Conclusion:

Applying for a mortgage in New Zealand is a nerve-wracking but exciting step toward home ownership in New Zealand. Hopefully after considering these basics you’ll feel a bit more empowered to get out there and realise your dreams!