Getting your first foot on the property ladder can sometimes seem an impossible task, especially if you listen to all of the talk about how unaffordable it is now and how millennials have essentially been shut out of the property market.
If this is something that is important to you, (and let’s face it, it should be important to you unless you want to be renting in your retirement years) then you need to put a plan together and make that plan URGENT.
No, it is not going to be easy, but don’t let that stop you. It will definitely be worth the effort, and it may not be as unachievable or unrealistic as you might have been led to believe.
Property Apprentice investment coach Debbie Roberts shares five steps to help with the process of successfully purchasing your first property.
STEP 1. MAKE THE DECISION TO GO FOR IT
Buying a property is not something that just happens on its own. It takes commitment to the process, and a desire to succeed. “Whether you think you can, or think you can’t, either way you are right” - Henry Ford.
STEP 2. MAKE A PLAN
Work out how much you can afford to pay each week to own your own home. This will need to be enough to cover not only the mortgage payments, but also additional costs such as insurance and rates. Also worth considering is how much you can afford each week if interest rates increase at some stage. Although current interest rates are low, the long term average interest rate in NZ is approximately 7%.
Now you have a budget, make sure any extra funds above your current living costs are put into a savings account to help boost your deposit and prove to the bank that you can afford to pay a mortgage. You may decide you can sacrifice some of your usual spending habits in order to reach your goal of owning a home sooner rather than later.
STEP 3. SPEAK TO A MORTGAGE ADVISER
Now you know how much you can afford to pay each week, it is time to find out how much you can actually borrow once you have enough deposit saved. You might not need as much deposit as you think either. Speak to an independent mortgage adviser to determine how much you can borrow based on your provable income. If you have previously approached a bank yourself and been turned down for lending, don’t give up hope. Just because your bank won’t approve a loan for you, doesn’t mean no other bank will. All banks use different criteria to determine whether a loan will be approved or not, this is where an independent mortgage adviser can be very helpful.
A good mortgage adviser should also be able to help you work out whether you can use your Kiwisaver funds towards your house deposit, and if you qualify for any government grants that are available. If you are able to get help from "The bank of Mum & Dad", then your mortgage adviser can also provide help with this.
STEP 4. SET A BUDGET FOR YOUR PURCHASE
Now you know how much you can borrow from the bank, and you know how much you can afford to pay for mortgage, rates and insurance etc. you will be able to work out how much extra you need to save (if anything) for your deposit, and what your top dollar purchase price is for your new home.
STEP 5. START YOUR SEARCH
Research recent sales in the area you want to live in, to see if the values in that area match your budget. Recent sales are available through real estate agents. Don’t rely on free websites for this information, or government valuations (GV, CV or RV) as they are often not a true reflection of property values. If the values in the area that you would like to live in (for the type of property you would like to live in) does not match your budget, consider other areas (or different types of properties) that might be a better fit for your first purchase. Be realistic with your expectations. Your first home doesn’t have to be the one that you live in for the rest of your life! Think of it as being a stepping stone to the next one.
When you are ready to actively look for your first purchase, work on building relationships with real estate agents so they can help you. Remember unless they are a buyers agent, they work for the vendor (the person who owns the house that is for sale), so learn how to negotiate. If there is absolutely nothing in your price range you would consider living in, then you might consider buying an investment property as your first purchase instead of a home. Different rules will apply!
For more information, watch the free video recording at the bottom of the homepage at www.propertyapprentice.co.nz called "Beginners Guide to Buying Your First Property".
This article is created for Property Apprentice