Don't freak out! You can actually afford a house, here's how

Our resident money man, Malcolm Knight, has come through with some awesome advice for those wanting to save for their first home. George has got all the tips you need to MAKE IT HAPPEN!

While much of the media report that this is near impossible (particularly in the Auckland market), I see first home buyers every week achieve their goal. Here’s some tips I’ve compiled that may help you achieve yours.

  • Save a deposit. It sounds boring, but a little discipline goes a long way and time travels fast! Try to understand your spending and set up a budget. By putting a plan in place in advance and then reviewing how you went against your plan, you will quickly gain a clear overview of where you are spending and where you can cut back. The banks love seeing financial discipline and commitment and while 20% is the holy grail (and provides the best interest rate offers), low deposit loans are possible and can fast track you into the market (I recommend 10% deposit as a minimum goal) – it may mean fewer meals out, less avocados and no offshore trips this year, but trust me in the long run it is worth it!
  • Maximise your Kiwisaver. As an employee you basically get a 100% return on investment with your employer matching your 3% contribution. If you aren’t a good saver, increase contributions to 4% or even 8% and watch your fund grow. Not being able to spend the money in there is great for your financial discipline and the returns the Kiwisaver funds are achieving are typically much greater than money sitting in a savings account. Get in touch to make sure you are in the right type of fund.
  • Talk to your parents. I’d suggest at least 60% of first home buyers I have worked with in the past couple of years have had some level of parental assistance. Your parents typically do want to see you succeed and there are some excellent structures the banks allow that won’t hurt your parents cashflow. Usual assistance is providing security for the deposit – either a gift, a loan or a guarantee.
  • Be realistic. Remember it’s your first home, not your forever home! Don’t expect to buy in your parent’s suburb or to have a swimming pool. The earlier you get yourself off the rental treadmill and start paying off your own mortgage rather than someone else’s, the closer you get to your dream home. Again time goes fast and your mortgage shrinks while your equity increases. 
  • Joint mortgage/flatmates. Don’t be afraid to buy with friends or family and do look for options where you can bring in flatmates, boarders (or even Air BNB spare rooms) to make your budget work – at least until you have tamed your mortgage.
  • Discuss with a broker/financial advisor. Typically our advice is free and we know exactly what you are entitled to (home grants, Kiwisaver withdrawal, LVR) and which banks are being the most co-operative and competitive. They can also assist to put the all important ‘pre-approval’, giving you confidence to start shopping! 

 

If you wish to discuss any aspect, don’t hesitate to get in touch: malcolm@threefold.co.nz or 021 024 28000

Catch him every Thursday morning on George Breakfast.