When the hammer falls: My journey to homeownership

BNZ Community member @CatherineV bought her first home at auction and reflects on the process, the properties, and the panic before the final hammer fell.

My husband and I are both savers, so when we got married in 2014 we were both in a pretty good situation with our savings. Both of us have put aside a little bit from each of our paychecks since we started working just over a decade ago, which has paid for all sorts of stuff over the years. Once we decided to test the waters of the property market it meant we had our deposit ready to go.

Price ranges and properties

Getting started was all about the detail. We had to speak to the bank to get an idea of what we could afford and we got some really good advice from them and fromBNZ Community blog posts on how to decide how much to borrow.

After a short time looking in Auckland and not finding what we wanted in our price range we had to consider other options. This meant considering different styles of properties like apartments rather than houses and extending our search geographically. It seems to be a common pain point for young buyers. After a while you tend to get rather tired of people suggesting you look further out when you’re already doing so and it’s a pretty personal decision as to where you live.

Open homes and spreadsheets and building reports, oh my!

It got quite intense. I’m now super familiar with the Trade Me Property app and could probably scan for new properties in my sleep. Our weekends consisted of going to 6+ open homes on a Saturday then back to the ones we liked on a Sunday. We’d often take Mum and/or Dad to get a second opinion. The whole process is time consuming and emotionally draining. I’d like somewhere and my husband wouldn’t.

When we got back from open homes we’d do a summary of them all and grade the ones we both liked. We had a spreadsheet where we would mark components of the property out of 10 and give the place an overall score. We’d mark things like location, size, street noise, kitchen and other benefits. It was really useful to geta bit more of an objective view, and is a great tip from this blog on what to look out for at open homes.

Finding ‘The One’

When we found a place we both liked it was time to get a building report. This was where it got painful. We were looking at apartments so had to be really careful. Not once but twice I had my heart set on a place only to get a building report and discover it was leaky. Depending on your builder and whether you get a written or verbal report, you’re looking at $300-600 each time. It’s a cost but one that we had to absorb. It’s nothing compared to the potential cost of buying a leaky property that would require a major investment on top of our purchase price.

Before going to an auction we needed to go to the bank to get pre-approval. When you bid it’s unconditional so you need to have all your ducks in a row. This blog gives a rundown of what you need to think about beforehand.

The big day

Auction day was absolutely terrifying. I’ve never been so scared in my entire life. From the minute I woke up until the day after the auction I was in a state of panic. My husband actually suggested I don’t go into the auction room as I looked so petrified but I made it in the end.

One of the bits of advice we were given was to have a pinch price, a buy price and a top price. I’d suggest also having a ‘top top’ price for the day. Including these prices on the spreadsheet helps. We ended up winning, on our ‘top top’ price. After that you’re taken away to arrange to pay the 10% deposit and sign all the paperwork.

Then it’s all over. After the hammer falls on the biggest financial investment many of us will ever make, there can be a sense of panic.  I felt it but there was also celebration at feeling like we’d reached a milestone. Corks may have popped. Good luck to any of you on this journey at the moment.

First home help

Buying your first home is no easy task these days. The booming residential property market has seen house prices rising steadily, and Reserve Bank restrictions on loan-to-value ratios mean banks are able to lend to fewer buyers if they have a deposit of less than 20%. It’s tough out there, and as a result, we’re seeing more people joining forces to buy a home. Continue reading…

Getting on the property ladder with KiwiSaver

Saving for a first home is hard. According to 2015 Reserve Bank inflation figures, house prices (especially in Auckland and Christchurch) are rising faster than wages. For many saving for a deposit, it can feel like the finish line never gets any closer. All is not lost, however – if you’re a member of a KiwiSaver scheme, you might actually be eligible to withdraw almost all of your KiwiSaver savings. In fact, as of April 1 2015, the Government has opened the first home buyer benefits up even further, making it just that little bit easier for new buyers to get on the property ladder.

Who is eligible?

First things first, you must have been a  member of a KiwiSaver scheme for three or more years in order to apply for a first home withdrawal. Not only that, it needs to be your first home and must be for you to live in — if you’re intending to rent the house out, then the KiwiSaver first home withdrawal isn’t for you.

How much can I withdraw?

Happily, as of April 1 2015, you can withdraw more than previously. Up until then, first home buyers were only able to withdraw their own contributions, any returns on their investment and any employer contributions — the Government contributions (member tax credits and $1,000 kick start) were out of bounds. As of right now, however, you are able to withdraw all the Government member tax credit contributions, too. So that means if you qualify, you can now withdraw everything in your KiwiSaver account except for the $1,000 kick start — a welcome change for first home buyers.

KiwiSaver HomeStart grant

In addition to accessing your KiwiSaver savings, you might also qualify for a grant to help you into your first home. The Government has replaced the old KiwiSaver first home deposit subsidy with a new KiwiSaver HomeStart grant. It’s a little more complex than it used to be when it comes to figuring out how much money you might receive, but it is also more generous.

If you’re purchasing an existing home (as opposed to building or buying a brand new one), the grant is between $3,000 and up to $5,000 — depending on how long you’ve been a member of and contributing to a KiwiSaver scheme ($1,000 per year of membership and contribution).

If you’re purchasing a new home, a property off the plans or land to build a new home on, the grant is doubled to between $6,000 and $10,000 ($2,000 per year of membership and contribution).

These amounts are per person, so if there are two of you and you both meet all the criteria, you can, in effect, double the maximum amounts.

House price caps

Because the Government’s aim with this scheme is to help first home buyers into home ownership, they figure you won’t be buying million dollar houses, so they’ve put maximum house price caps in place. These caps vary depending on where you are in the country, and, as part of the recent changes, have been increased slightly.

In Auckland, the maximum purchase price is $550,000. In Hamilton, Tauranga, the Western Bay of Plenty, Kapiti, Porirua, Hutt City, Upper Hutt, Wellington, Tasman, Nelson, Christchurch, Selwyn, Waimakariri and Queenstown, the maximum purchase price is $450,000. For everywhere else, the maximum purchase price is $350,000.

More rules

To get the grant, there are a few boxes to tick. You must be 18 or over, have been a member of and contributing to a KiwiSaver scheme for at least three years, have an annual household income less than $80,000 for one person, or $120,000 for two or more people. You also need a deposit of at least 10%, which a home purchase withdrawal from a KiwiSaver account counts towards, and plan to live in the house for at least six months. Phew! Still, it’s a great help if you qualify.

How do I get it?

When it comes to the first home withdrawal, you should talk to your KiwiSaver provider as they will handle the application process and the release of the funds.

The HomeStart grant, on the other hand, is run by Housing New Zealand, so if you think you’re eligible, get in touch with them to begin the application process.

One last chance

Last of all, even if you’ve previously owned a home it may be possible that you’re still able to access your KiwiSaver savings and qualify for the KiwiSaver HomeStart grant. If you no longer own a home and can prove that you’re in the same financial position as a first home buyer, you might just be in luck. To find out if you are, you should again contact Housing New Zealand for help.

The BNZ Kiwsaver Scheme has a First Home Buyer Fund designed for people planning to buy their first home in the next three to five years and want to use their Kiwisaver to help save for it. Find out more.

This article is solely for information purposes and is not personalised financial advice. We recommend that you seek advice specific to your circumstances and contact Housing New Zealand for full details of the KiwiSaver HomeStart grant. No representation or warranty, express or implied, is made or provided as to the accuracy, reliability or completeness of any statement in this article. None of BNZ Investment Services Limited, Bank of New Zealand or any other person accept any liability for any loss or damage arising out of the use of, or reliance on, any information in this article.

The journey to being credit card debt free

Many of us tend to live in denial when it comes to credit card debt, so if you find yourself scraping to make the minimum repayments each month and generally going nowhere, it’s time to face up to debt.

Plan your approach

If you’re serious about wiping out that credit card, you’ll need to do a few things. First, eliminate the spending habits that created the debt. Then make a plan for the money you have coming in. Next devise a strategy to pay off the debt, and finally, introduce ways of being good with money so that you avoid slipping back into old ways.

Eliminate the negative

Getting control over your debt means understanding how and why you got there in the first place. To do this, you need to take an honest look at your spending habits and identify places where you can stem the flow of money out of your accounts. You’ll need to be brutally honest and ready to make sacrifices in order to free up money that can be funneled toward the debt. The best way to do this is to create a budget which will become your blueprint for the future.

Cut interest costs

When it comes to interest, the longer you have a debt, the greater the cost; and that’s money that would be better off paying down your debt. So get smart about it, study up on the cost of borrowing and minimse your interest costs.

One way of doing this is to shop around and find the lowest credit card interest rate you can. Chances are your bank will have a low rate card that you simply don’t know about. Talk to your bank, let them know what you’re trying to achieve and get some expert input.

Find a strategy that suits

Paying down debt can be a personal thing that means finding a strategy that works best for you. For instance, if there are multiple debts involved, some people prefer to tackle the larger amounts that carry the highest interest costs first. Others might find success by knocking off the smallest debt first to get a few quick wins under the belt.

Consolidation

If it all seems too much, a debt consolidation loan can be a good way of condensing many debts into a single, easier to manage loan. This tactic helps by creating a degree of certainty around your monthly costs. A personal loan typically has a set term of a few years with repayments that are the same each month. This makes budgeting easier since you know exactly what’s coming up. If you already have a personal loan or a home loan, check up on some of the many options on offer from your bank as there may be a more cost effective option for you.

Balance transfers

Another way to accelerate paying off your card is a balance transfer — these offer an even better deal on interest costs, albeit over a shorter period. Most deals will have a special rate for 6 to 12 months on the transferred debt before reverting to the standard interest rate. If you’re able to pay more in a shorter period of time (and are disciplined enough to not spend on the card at the same time), this can save you plenty in interest charges.

Staying debt free

When the end is in sight, it’s time to think about how you can stay debt free. Start by lowering your card’s limit to something more manageable — while you’re at it, tell your bank you don’t want to be offered credit limit increases unless you ask for them. Pay your card off in full at the end of each month to avoid interest altogether and don’t use your credit card to withdraw cash as this attracts a higher rate of interest that starts accumulating from day one.

Trying to get on top of your credit card debt? Visit our calculator to see how much you could save with a balance transfer and find more information or apply for one.

Young Money: Fortune favours the thrifty

One of a series of blogs from real people sharing real experiences, observations and advice about being good with money.

Amelia Petrovich is a part time waitress and full time uni student at AUT in Auckland. Originally from Wellington, the 20 year old moved to Auckland to complete a Bachelor of Communications degree and is currently in her second year of study. Continue reading…

Get smart with interest

What is interest?

Whenever you hear people talking about home loans, the subject of interest rates is never far behind. And with good reason — the interest rate is essentially the price at which a bank charges you for the loan. It varies over time as it rides the fluctuations of the wider, global economy, and plays a huge part in how much your home loan will cost over the years. Continue reading…

Young Money: Own it, don’t loan it

One of a series of blogs from real people sharing real experiences, observations and advice about being good with money. 

Simon Palfrey is a 22-year-old student at Massey University in Auckland. He is studying towards a degree in Communications majoring in Public Relations and Journalism. Simon currently works in the health and safety sector and enjoys sport and spending time with family and friends in his spare time. Continue reading…

Buying at auction

Auctions can be a great way to buy or sell property. They generally reflect the true market value of a house and the usually tedious due diligence and negotiation process between multiple parties is over as soon as the hammer falls.  Because of this, they can also be quite overwhelming with lots going on, not only during the auction but beforehand as well. So where do you start if you’re looking to buy at auction? Continue reading…