Welcome Home Loans; anyone used one?

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Forums › Finance and wealth management › Welcome Home Loans; anyone used one?

Disrespective

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#138755 15-Jan-2014 19:22

My girlfriend and I are three months into the arrival of our first child and we're also in the process of figuring out how we're going to buy our first home on one (and hopefully a half, soon) incomes. The Welcome Home Loans have been brought up in our search.

Has anyone used one? We'd still be a year or so away from having enough for a 10% deposit anyway, but thought someone might have something useful to mention now.

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#967766 15-Jan-2014 20:39

My 2 cent:

I personally think it is a bad idea to borrow money to buy a house. I did my own calculation and I found out much better to rent and put aside some money regularly. You might want to wait until you can afford more deposit.

nickb800

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#967775 15-Jan-2014 20:58

My understanding is that welcome home loans were limited already, before LVR limits were put in, and can be quite hard to get because of this

kingjj

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#967780 15-Jan-2014 21:07

nakedmolerat: My 2 cent:

I personally think it is a bad idea to borrow money to buy a house. I did my own calculation and I found out much better to rent and put aside some money regularly. You might want to wait until you can afford more deposit.

My 2c: While its hard to argue against saving more of a deposit, with the current property market and ever increasing prices, especially in the entry level market, one may end up saving less than the price increases over time. Obviously you need to make sure you can afford the loan and costs associated with home ownership (rates, insurance, maintenance, improvements etc) but I'm of the opinion that if you find a house in your price range and can get a loan than its best the get on the property ladder sooner rather than later.

While my wife and I didn't use a Welcome Home Loan for our first house we did get a loan with only a 10% deposit, we used a mortgage broker who got us a very good deal and made sure that the repayments were affordable. Best thing we ever did was move away from renting to home ownership. A good way to up your deposit quickly is to use your Kiwi Saver contributions as part of your deposit and look at applying for the HNZ first home buyers subsidy (we got $3000 as first home buyers, no need to pay back if you live in house for more than 6 months).

alasta

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#967792 15-Jan-2014 21:21

kingjj: While its hard to argue against saving more of a deposit, with the current property market and ever increasing prices, especially in the entry level market, one may end up saving less than the price increases over time. Obviously you need to make sure you can afford the loan and costs associated with home ownership (rates, insurance, maintenance, improvements etc) but I'm of the opinion that if you find a house in your price range and can get a loan than its best the get on the property ladder sooner rather than later.

When you're dealing with personal finance debt is more expensive than equity, and when you're looking at the proportion of debt required to buy a house there is a breakeven point beyond which you are better off renting. A lot of young people don't want to hear this, but the reality is that it may never be economically justifyable for many of them to ever own a house and overseas experience shows that this isn't all doom and gloom. Of course some people will still buy a house even if they'd be financially better off renting and that's fine - if you really want it and can afford the repayments then do what makes you happy.

You can use capital gains to prop up the economic case for buying versus renting, but the mistake people often make is that they use history to predict the future. In my view market increases over recent history are unsustainable, and the market could be in for a shock when the baby boomers starting dropping dead or even just downsizing.

nakedmolerat

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#967806 15-Jan-2014 21:27

kingjj: My 2c: While its hard to argue against saving more of a deposit, with the current property market and ever increasing prices, especially in the entry level market, one may end up saving less than the price increases over time. Obviously you need to make sure you can afford the loan and costs associated with home ownership (rates, insurance, maintenance, improvements etc) but I'm of the opinion that if you find a house in your price range and can get a loan than its best the get on the property ladder sooner rather than later.

If you are a gamble person, yes. 8 years ago my friend in the Ireland was told to buy a house as soon as he graduate. He did just that. 5 years later, his current house price is less than 40% of what he paid. He struggles big time now to service the loan. If you think the house price is always going to go up, then bank is your friend. This is my personal opinion.

It is also a fallacy to believe that you 'own' the house when you have loan to service.

chevrolux

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#967815 15-Jan-2014 21:39

No experience with Welcome Home loans but generally haven't heard any bad things about it. I think it has been limited though in light of the LVR changes.

I would say if you are close to a deposit just go an approach a mortgage broker. They aren't as bad as everyone makes out. Any good broker will not cost you any extra than approaching a bank directly and you will often get a better deal.

I bought my first home when I was 20, 3 years ago now, and it is hands down the best thing I have ever done. There is something just so awesome knowing that it's your place. At the moment I have high repayments to build equity. But in a year or two I will sell and be able to have smaller payments for the next house.

I didn't have the full 20% but the mortgage broker had a good look around for me for options and it all worked out well in then end. When I was looking they had only just started going back to low equity loans as it was around the time America was going a little crazy with mortgagee sales and it was all over the media etc.

Edit: Finished typing a sentence lol.

Disrespective

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#967822 15-Jan-2014 21:43

Thanks for the thoughts.

I'm an Architect. I can't live in a renting environment for much longer and with the little one growing older ever faster we need some grass.

Neither of us are adverse to renting if we have to but it's not necessarily about the financial gains inasmuch the emotional/psychological gains that are had from having somewhere to call 'home'.

We won't be over extending our loan and repayments won't be out of our abilities given our current income brackets.

I purely wanted to know if someone had used a Welcome Home Loan, and if so, how it went.

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mattwnz

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#967835 15-Jan-2014 21:49

You haven't said where you are buying, nor the price range of the type of property. House prices will always rise over time, but not everywhere in NZ are house prices going up but large amounts. It is mainly Auckland and up north, and christchurch. I probably wouldn't bother in those locations. Whether a welcome home ploan is worth getting is solely based on whether you would qualify. If you qualify, then it is probably a no brainer, but you don't want to pay more than the house is worth, and you don't want to even buy at the top of bubble.

Stan

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#967860 15-Jan-2014 22:51

nakedmolerat: My 2 cent:

I personally think it is a bad idea to borrow money to buy a house. I did my own calculation and I found out much better to rent and put aside some money regularly. You might want to wait until you can afford more deposit.

This argument must be dependent on the area you live in.
When I brought my house the price of renting was only around $50 cheaper per week when factoring in maintenance and rates a small price to pay when you consider the inspections general irritations of renting.

rayonline

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#967864 15-Jan-2014 23:04

The people I know don't really do the finance vs rent thing. They look at it as it is something their's, they see that the landlord can raise prices, they have to move, cannot do DIY, something to chat and boast about with others, you get an asset even if you die with the house, you can pass it on .. They see it as if you pay rent, then you always pay rent for the life vs buy when you are paying rent in a way but you pay more but then you get somethign at the end.

mattwnz

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#967865 15-Jan-2014 23:04

nakedmolerat: My 2 cent:

I personally think it is a bad idea to borrow money to buy a house. I did my own calculation and I found out much better to rent and put aside some money regularly. You might want to wait until you can afford more deposit.

The problems with renting is that they can ask you to move on. You also can't do with it what you want, and you have to put up with landlords, who may not be helpful if you need to get something done, or fixed. In a way I agree with you and I certainly wouldn't buy in highly inflated areas such as Auckland, because that bubble has to burst. But there are sill some good value areas in NZ.

driller2000

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#967870 16-Jan-2014 00:33

mattwnz:
nakedmolerat: My 2 cent:

I personally think it is a bad idea to borrow money to buy a house. I did my own calculation and I found out much better to rent and put aside some money regularly. You might want to wait until you can afford more deposit.

The problems with renting is that they can ask you to move on. You also can't do with it what you want, and you have to put up with landlords, who may not be helpful if you need to get something done, or fixed. In a way I agree with you and I certainly wouldn't buy in highly inflated areas such as Auckland, because that bubble has to burst. But there are sill some good value areas in NZ.

to the OP - fundamentally do what works for you in terms of your situation and goals - renting is not for everyone - neither is having a mortgage for everyone

if you do decide to buy - look into welcome homes and kiwisaver as others have suggested - as an inc in deposit is obviously a good thing in terms of reducing your mortgage debt level

do the numbers in terms of affordability - make sure it works for you now and in the future in terms of a sensitivity analysis e.g re interest rates / possible income changes etc - and make a decision!

good luck with said decision :)

a couple of comments re the above posts:

1. we could argue "rent vs buy" till the cows come home....and the media, bloggers, commentators, economists etc have done ad nauseum over the last 5 years - let's not :)

simply put renting has been cheaper for the last few years in terms of living in an equivalent property - this has not and will not always be the case
furthermore mortgages tend to go down over time / rent only goes up - so this differential changes over time
a homeowner will have a home (asset) at the end of the mortgage, most renters will have nothing, as most fail to put the difference aside and invest it.

2. as for "bad idea to borrow money to buy a house" - is there really any alternative for most people? - esp if you don't already have a home / massive wad of cash...frankly that is a meaningless statement for most people.

3. and re the "inevitable bubble burst in auckland" - we have heard this so many times over the last 5 years post gfc and ya know what? - its been and gone, with drops of circa 15-20%% over the 2008 to 2011 period relative to 2007 peaks and now prices are 10% + over the 2007 peak. both the drop and rise is however meaningless unless you lock it in through selling.

quite simply supply and demand is driving prices in auckland (and chch) - whether it be existing owners trading up/down, new home owners, investors, immigrants ( internal and external) - and this demand shows no sign of evaporating.

(note: comparisons to ireland / us / greece etc are old news and just don't stack up to any sort of analysis - the situation in nz (ie. banking sector stability / bad lending practices leading to toxic debt / employment levels / housing stock levels and demand / government debt and stability) were and remain fundamentally different to the situations that led to the collapses in the oft (mis)quoted comparison counties.)

righto! :)

end rant/

nathan

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#967885 16-Jan-2014 01:16

mattwnz: You haven't said where you are buying, nor the price range of the type of property. House prices will always rise over time, but not everywhere in NZ are house prices going up but large amounts. It is mainly Auckland and up north, and christchurch. I probably wouldn't bother in those locations. Whether a welcome home ploan is worth getting is solely based on whether you would qualify. If you qualify, then it is probably a no brainer, but you don't want to pay more than the house is worth, and you don't want to even buy at the top of bubble.

"House prices will always rise over time"

O RLY ;)

stevenz

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#967917 16-Jan-2014 08:21

In the process of doing the same thing myself, have yet to encounter anyone who has actually used it as yet.

I'm also eligible for the KiwiSaver first home subsidy, which mostly just offsets the fact that you can't withdraw the government contribution component of your KiwiSaver. Not going to turn my nose up at a "free" $5000 though.

Property investors must love the new LVR deal, less competition for them to buy everything up and make life difficult for 1st time buyers!

@KnightNZ

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#967920 16-Jan-2014 08:30

Yes, I have used a welcome home loan. The process was easy however there are some requirements i.e. the house has to be fully insured during the duration of the loan and you have to live in the house i.e. you are not allowed to rent it out while still paying off the loan.

I applied through Kiwibank and found the whole process very easy. For me the whole process was done over the phone and through email which suited me perfectly.

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