I used it to get my first house about 3 years ago. When it was 5% over 200k my house was 235k so i only need a 5k deposit. Now the house is worth over 300k thanks Earthquakes:) I refinanced from kiwibank to westpac with 25% equity no worries so im now not bound by the WHL rules some of which are weird(not able to rent rooms out etc). The process is much the same for a normal loan the only difference was the WHL looks at your banking history for the past year and question any large payments/deposits.
khull: Nothing worse than renting and paying off someone else's loan!
Unless you need to be mobile where you can drop everything and just walk out to another life, country or other commitments, then rent. Your post doesn't seem to suggest that so I'd recommend buying a home
If you don't like the property or things don't work out, then you can always sell it - there will be at an expense, don't get me wrong. However if you chose to rent then that money is sunk.
This argument comes up time and time again during these types of discussions, and ignores the expenses associated with ownership such as:
- Interest on Mortgage - this is the big one. - Maintenance that does not add capital value. - Cost of Buying/Selling as mentioned earlier including engineering checks, etc. - Rates. - Insurance. - Body corporate fees. - The opportunity cost of your equity - i.e. what you would have otherwise earned if you'd put it in a term deposit or managed funds.
If the sum of the above is higher than rent on an equivalent property then you are better off renting. The exception would be if you can earn enough capital gains over and above inflation to offset the difference, but as others have pointed out this is highly unpredictable and therefore a risky strategy in my view.
kingjj: On the flip side again, renters need bond and rent in advance payments upfront to move on...
Bond and rent in advance is irrelevant because you get it back at the end of the tenancy and then use it to pay for your next place.
Not sure what your experience with renting is but I've never been paid my bond back before I moved properties. Usually it is 2-3 weeks after moving properties meaning that a separate bond payment would have to be found for that time. For a lot of people an extra bond payment plus extra rent in advance and other moving costs are significant and impeding.
I bought my first home in May last year with a WHL, just before all the new rules about deposits came in. We had absolutely no deposit whatsoever and had only just started kiwisaver so we couldn't use kiwisaver for it. We used a $3000 "gifted" deposit from my mother. We went through a mortgage broker and he got us a mortgage through TSB. They were so good to deal with not like the Australian owned bank we were previously with. Lol
khull: Nothing worse than renting and paying off someone else's loan!
Unless you need to be mobile where you can drop everything and just walk out to another life, country or other commitments, then rent. Your post doesn't seem to suggest that so I'd recommend buying a home
If you don't like the property or things don't work out, then you can always sell it - there will be at an expense, don't get me wrong. However if you chose to rent then that money is sunk.
This argument comes up time and time again during these types of discussions, and ignores the expenses associated with ownership such as:
- Interest on Mortgage - this is the big one. - Maintenance that does not add capital value. - Cost of Buying/Selling as mentioned earlier including engineering checks, etc. - Rates. - Insurance. - Body corporate fees. - The opportunity cost of your equity - i.e. what you would have otherwise earned if you'd put it in a term deposit or managed funds.
If the sum of the above is higher than rent on an equivalent property then you are better off renting. The exception would be if you can earn enough capital gains over and above inflation to offset the difference, but as others have pointed out this is highly unpredictable and therefore a risky strategy in my view.
I used to be firmly in the renting crowd, as I was mobile and never in the same city for more than 2 years.
Now I am not constantly moving I have brought my own house. I love my DIY and if I don't like something, the sledgehammer (or something more appropriate) can come out. Paint can get slapped on. I can wall mount a TV without having to get the landlords permission. The landlord can't tell me they're selling the house (happened twice in 3 years) or to get out as they're moving back in.
As to the OP, I know a number of people who have used the Welcome Home Loan, and it has been good for them. As was mentioned earlier, when working out your ability to repay, don't go by current interest rates. Work it out based on 7,8, or even 9%. How would this affect your lifestyle? Its easy to say you'd be fine, but try living on that reduced surplus for a few months (and save some $$$) and see how you feel then.
Don't forget as well if you've been in Kiwisaver for 3 or more years you may be eligible for the first home subsidy of between $3000 and $5000. Banks won't allow you normally count this as part of the deposit (although it does go towards your home loan) but the Welcome Home Loan does count it as part of your deposit. So if you're a couple, that's potentially another $10k towards the deposit. Info on this subsidy can be found on the Housing New Zealand website.
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