First home beginners guide

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33coupe

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Topic # 202027 14-Sep-2016 13:10

Hi there,

I've searched on here and Google but have yet to come across something that is clear, concise and to the point.

I wad just wondering if the best brains/oracles of NZ would be able to help this.

I have a deposit, and am applying to banks for a mortgage, but After that i have no idea what to do (or not do).

If someone could explain in simple terms that would be great, i really have no idea.

For example, when i go to an open home do i need to get a pre purchase house inspection report, or can it be done after the auction ( if auction day after open home).

Any other things to do, fees on top of house cost etc?

Any advice would be hugely appreciated.

Thanks

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Reply # 1630205 14-Sep-2016 13:15

step 1. go to a mortgage broker, they dont charge you, they should always get you a better rate from the bank than you could by yourself, and they can help with these types of questions.

personally for a old house, i would always get an inspection, they cost about $750 (I just had one done a couple of months ago when I bought a old house (30 years old)). For a new house that has a 10 year master builder guarantee, and CCC, i would potentially skip it.

lawyers can cost a bit, but you should get a few $1000 from the bank when you sign up for the mortgage (I got 4.5k when I signed up a few weeks ago).

auctions are unconditional, unless you make a agreement (in writing, via lawyers) that some things will be addressed if you win (this is where the inspection comes in handy). for example I had the seller agree to fix some rotten wood, clear out the gutters, etc. mostly minor stuff, but hey I didnt want to pay for it.

mattwnz

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Reply # 1630219 14-Sep-2016 13:26

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Most 'good' banks have guides. I got a home buyers kit from Westpac, which basically tells you everything you need to know.

In terms of Auctions, you have to do your due diligence before the auction. You can't bid, then have a home inspection, then find problems, and pull out. So there is more risk involved with auctions, so that should also be reflected in the price you bid. If you use an inspection company, then that is a cost you pay whether you win or lose the auction. Auctions are great for buyers, and not so good for sellers, as the top bid often isn't the maximum the winner was prepared to pay. Whereas with tenders, which are common in Wellington, buyers have to submit their best price, so they are an advantage to sellers. Agents love auctions, especially in bubbles.

timmmay

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Reply # 1630224 14-Sep-2016 13:33

My wife works in property law, though is taking a break at the moment. Talk to a lawyer or legal executive and ask for their guidance - though keep in mind there are some things they won't say as it's not their place or because it could expose them to liability. Things they might not say include "you want to pay how much for that dump!". Yes they're expensive, $250/hr give or take, but the could save you from making a much more expensive mistake. My wife has had people have her look at six or eight properties, which can cost hundreds or perhaps $1000 per property, and then not have their offer accepted.

You should get a builder or property inspectors report, and you shouldn't trust vendor provided reports. You should get a LIM, which you can do through the council, though legal interpretation is beneficial and they can get it for you. You shouldn't sign anything until a lawyer looks at it, agents often use contracts that are ridiculous. If you make an offer with any conditions you probably won't win in this market. Now is not a great time to buy, houses are going for crazy prices, often 25% over valuation.

Update - if you want to use KiwiSaver you have to apply well in advance, it takes time to process. It can only be used for (from what I've overheard) a first home that you intend to live in yourself. Anything other than "here's cash, give me the house" can take additional time to get moving.

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mattwnz

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Reply # 1630226 14-Sep-2016 13:34

reven:

lawyers can cost a bit, but you should get a few $1000 from the bank when you sign up for the mortgage (I got 4.5k when I signed up a few weeks ago).

Banks aren't giving the money away, it will be covered in the margins on the interest or other costs you pay in the future. Some also have given away 'free' ipads, tv etc if you signup to a new mortgage. But certainly people should get a lawyer involved early. The other thing is that if you want to use kiwisaver, you must do it through a lawyer anyway, so the kiwisaver kickstart people get, pretty much gets eaten up by that.

reven

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Reply # 1630227 14-Sep-2016 13:37

mattwnz:

reven:

lawyers can cost a bit, but you should get a few $1000 from the bank when you sign up for the mortgage (I got 4.5k when I signed up a few weeks ago).

Banks aren't giving the money away, it will be covered in the margins on the interest or other costs you pay in the future. Some also have given away 'free' ipads, tv etc if you signup to a new mortgage. But certainly people should get a lawyer involved early. The other thing is that if you want to use kiwisaver, you must do it through a lawyer anyway, so the kiwisaver kickstart people get, pretty much gets eaten up by that.

of course theyre not really giving it away. but if one bank is offering say 4.15% fixed for 2 years, and another bank is offering 4.15% fixed for 2 years + $4.5k cash, go for the $4.5k cash.

mattwnz

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Reply # 1630236 14-Sep-2016 13:46

reven:

mattwnz:

reven:

lawyers can cost a bit, but you should get a few $1000 from the bank when you sign up for the mortgage (I got 4.5k when I signed up a few weeks ago).

Banks aren't giving the money away, it will be covered in the margins on the interest or other costs you pay in the future. Some also have given away 'free' ipads, tv etc if you signup to a new mortgage. But certainly people should get a lawyer involved early. The other thing is that if you want to use kiwisaver, you must do it through a lawyer anyway, so the kiwisaver kickstart people get, pretty much gets eaten up by that.

of course theyre not really giving it away. but if one bank is offering say 4.15% fixed for 2 years, and another bank is offering 4.15% fixed for 2 years + $4.5k cash, go for the $4.5k cash.

If they are playing that game, you should be able to get the interest rate down as an alternative option. But if that is the lowest they will go, then yes take all you can get from them. The other thing to the OP is to really shop around with the banks, and don't just accept the advertised interest rate. You can save thousands by doing this.

trig42

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Reply # 1630267 14-Sep-2016 14:27

Yep, I'd agree with bargaining with the banks - they will move down on interest rates if you bargain (we go an extra 0.3% off when we refinanced in February - it adds up!)

You haven't said what market you are buying in. If Auckland - good luck. Elsewhere, make sure you do your research and have some idea what properties are selling for (go to a few auctions if possible).

mattwnz

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Reply # 1630296 14-Sep-2016 15:00

Due to it being auction, I would expect Auckland. I agree about research. I would do a spreadsheet of all recent sales in the area and comparing the RV with sale price, and look at the type of house it is. There will always be properties that are better value than others.

Also don't fall victim to any real estate agents spin, as they are experts at what they do, and there are many dos and don'ts involved when dealing with them. They are working for the seller to get the best price for the seller. They are only required to be fair to the buyer. First home buyers are fresh meat. The OP could look at using a buyers agent, who will work for you directly and will help you through everything. It maybe worth the money.

Disrespective

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Reply # 1630308 14-Sep-2016 15:32

It's a dark art, home buying.

The steps I took (and a few other things worth mentioning) are:

- Get pre approval from a bank. This doesn't mean locked in interest rates, just that they're happy to lend you up to a certain amount.
- If planning to attend auctions, ensure you have the deposit is available in an account on the day, as you will be expected to transfer your purchase deposit after the auction completes.
- If you purchase from an auction, the purchase is unconditional. This means you must have pre-approval and be happy with any building inspections done prior. Assume you will not be negotiating with the vendor. - Sometimes you can negotiate with the vendor of a property if you are at an auction. You must be the highest bidder, and they must ask to enter negotiations. This will mean you have to spend more money, but you can at least negotiate with them if for example, you don't need the furniture to be included in the sale. Don't hold your breath though...
- After any negotiations you will have to go back to the floor and the auctioneer has to take your negotiated price back to the floor. This allows other bidders a final chance to bid, and for you to lose. Never assume you have won until the gavel falls.
- Get a building inspection. I didn't, however I do have a fair bit of experience in the trade, but I still missed a few things.
- Do your own inspection. Get under, inside, behind, above everything in the house. Don't feel bad about lifting couches, opening cupboards, climbing in/on/under things. Arrange to take your ladder or wear rough clothes if you want to get into it before having someone else do it.
- Be very very very very (did I say very?) wary of any construction which appears to have a cement render on it. This includes, but is not limited to, 90's monolithic facade systems. There was a plaster system used in the 60's which people installed directly over weatherboard walls. There is absolutely no way of knowing the state of the structure without doing damage to the property. You can't do this until you own it, obviously. A friend is currently in the gun for 50% bill of $225k to reclad his house because approx. 6m of wall framing is rotten. The bill may rise once they really get stuck in.
- If you are offering on a tender, then put your best foot forward. Make the best offer you can, and don't hold anything back. If you lose by $500 they very rarely ask you to increase your offer, and you will kick yourself if you lose by such a small amount and you feel like it was worth spending it in the first place.
- If/when you lose on a tender, the agent can't technically tell you what the winning price was, but this information is freely available once the conveyancing has been completed. One site which has this information is www.homes.co.nz
- www.homes.co.nz can be a good source for property value. It's all to be taken with a grain of salt, but will give you an idea of previous sales in the area, and what their algorithm thinks it's worth. But with Akl prices rising more than $200 a day, assume the data is well out of line.
- If you find during an inspection that something needs work, feel free to call builders or other tradespeople for quotes to help amend your offer price. You can supply this information with your tender as explanation for the lower (potentially) number.
- I have a few friends who have also had success with including a letter in their tender docs. It outlined their plans with the property and a bit about themselves. They didn't get it cheap, but they were either the same price or very close to other tenderer's, and the letter set them apart. Not everyone is selling property to make money and screw over first home buyers.

That's probably enough thoughts for now. Others will undoubtedly disagree with some points, others agree, but should give you some food for thought.

reven

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Reply # 1630310 14-Sep-2016 15:33

homes.co.nz was of great use to me. I found the valuations it has very close to the money (5k less than what I paid for new place and 20k less than I got for my old place (thanks to a bidding war :))

MikeAqua

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Reply # 1630311 14-Sep-2016 15:36

Banks like to know you are competent with money. Beyond their assessment of you as risk factor they use a bunch of formulae you can do little about except earn more/borrow less.

They like to see evidence of saving. Probably you have that already if you have saved your deposit. If you have won or inherited it they are less impressed so save each pay day to prove you can save/budget.

A lot of banks will want to go through a basic budget with you - be prepared to do that by knowing what your outgoings are. If you don't know, you come across as a person who is not good with money.

Bargain with banks. Your current bank have something to lose if you go elsewhere. Use that to get a great offer from them. You can either take it or use it to beat another bank down even further. I went back to my bank three times. They hated me but who cares - they're my bank not my friend (remember the crocodile ad) and I got a deal that will save me buckets over the life of the mortgage.

Interest rates are historically low right now, so it's a great time to borrow. Repay as much as you can afford to now. While interest rates are low you are paying off more principle.

Generally for an auction a builders report should be available. Auctions are cash unconditional. There is no backing out unscathed. So you need to be 100% sure this is the house for you.

Mike

mattwnz

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Reply # 1630314 14-Sep-2016 15:41

Disrespective:

- If you are offering on a tender, then put your best foot forward. Make the best offer you can, and don't hold anything back. If you lose by $500 they very rarely ask you to increase your offer, and you will kick yourself if you lose by such a small amount and you feel like it was worth spending it in the first place.

The problem with tenders is if you are the top tenderer, that agents can still come back to you to offer more. Also many people are making the mistake of offering the maximum of what they can afford to borrow from the bank. They don't take into consideration that interest rates will likely go back up again. So if you can afford to service a 4% mortgage, can you afford to service an 8% mortgage. Also with property bubbles, it is likely people could be caught with negative equity if there is a property price correction. It may not be a problem if you plan on living there for the next 30 years, but it can cause major financial stress, and can affect you ability to borrow more to say buy some rentals.

Disrespective

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Reply # 1630319 14-Sep-2016 15:54

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mattwnz:

Disrespective:

- If you are offering on a tender, then put your best foot forward. Make the best offer you can, and don't hold anything back. If you lose by $500 they very rarely ask you to increase your offer, and you will kick yourself if you lose by such a small amount and you feel like it was worth spending it in the first place.

The problem with tenders is if you are the top tenderer, that agents can still come back to you to offer more. Also many people are making the mistake of offering the maximum of what they can afford to borrow from the bank. They don't take into consideration that interest rates will likely go back up again. So if you can afford to service a 4% mortgage, can you afford to service an 8% mortgage. Also with property bubbles, it is likely people could be caught with negative equity if there is a property price correction. It may not be a problem if you plan on living there for the next 30 years, but it can cause major financial stress, and can affect you ability to borrow more to say buy some rentals.

That's true, but if you've offered the best you can, then you won't be swayed by an agents request. For what it's worth, they HAVE to show any/all offers to their vendor. So it's not the agent asking, it's actually the vendor asking, through the agent. If you won't go higher as you've hit your emotional limit then nothing is lost.

If people aren't able to do their research on what they can afford to borrow/repay then that's unfortunately on them. As a buyer you need to offer what you are happy to pay. If you lose by $100, you need to be comfortable that the property is not worth that extra. If you lose by this amount it can be devastating, and not worth the emotional anguish when you are now resigned to doing all the property research all over again.

chimera

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Reply # 1630424 14-Sep-2016 18:15

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If you're in Auckland, I highly recommend you go and signup for the free seminar at Property Apprentice...

http://www.propertyapprentice.co.nz/free-seminar/home-buyers/

Even though their main focus is providing education for investors, they also have a free "first home buyers" seminar which I guarantee you will get a LOT of value out of, and a lot of fun!

The S&P agreement can be very daunting until you get used to putting out offers, especially with pushy real estate salesmen.

Probably biggest rule though, as a few others have eluded too above, try your best not to get too emotionally attached to a property or you'll end up spending more than you want!

mudguard

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Reply # 1630541 14-Sep-2016 22:20

Westpac have a great impartial guide. It's a booklet and quite thick so branches don't tend to have many, so go in and ask. It covers EVERYTHING. It's basically house buying 101. I grabbed a few before I left the bank but don't have any left.

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