6 Tips For First Home Buyers During The Lockdown
Make use of the lockdown to work towards your first home
With New Zealanders getting adjusted to the new norm under the Covid-19 lockdown, many will be thinking about what this means for a pre-Covid plans. You might be wondering where to now with your first home-buying plans.
Situations like this can throw a spanner in the works of your plans. However, our advice is always to focus on what you can control and plan based on that. Here are our suggestions for what you can work on during the lockdown:
1. Focus on the positives
In these uncertain and unsettled times, it is important to focus on the positive factors that will help first home buyers.
Record low-interest rates
With the recent cut of the Reserve Bank OCR to a record low of .25 locked in for at least 12 months, the Banks are offering rates never seen before.
For those with 20% deposits, some Banks are offering 3.05% fixed for 1 year. Those with less than 20% can still get a mortgage, the lender will charge either a Low Equity Premium or a Low Equity Margin. These are essentially an increased interest charge to offset the risk of a property’s value falling below the amount of the loan.
Restrained house prices
Before the spread of Covid-19 took hold, many economists had predicted house price rises of 5% or more in 2020. Now, ASB’s economist is expecting annual house price growth to be dented with a revised growth rate closer of 1.8%.
An opportunity to make a plan
With the lockdown putting a pause on the housing market, now is a good time to focus on making a plan. Do you have a savings plan? Make a budget to focus your spending so you can put as much as you can towards your deposit. A budget will also provide evidence to a lender that you will be able to comfortably manage home loan payments. When it comes time to go house hunting, prioritise the things you want from a property to help focus your search.
2. Ride The Rollercoaster That Is KiwiSaver
3. Concentrate on savings or debt repayment
4. Understand what your key barrier is
Things that lower the borrowing power of your income:
- Student Loans: While Banks don’t consider Student Loans in the same way they do normal credit card debt, they do factor it in as reducing your spare income that can contribute towards a home loan. So if you are struggling with the income barrier, getting rid of a student loan will help overcome this.
- Having a high credit card balance and/or limit: Banks take into account the amount the minimum monthly payment (usual 3%) for your credit card at its limit would be each month. So if you have a high credit card balance, focus on paying it down as much as possible and then lowering the lowest limit you can.
- Other sources of income: Can you get in a flatmate or boarder to come with you into your first home? Banks will factor in a portion of this income into their calculations.
- Getting a raise: Granted this isn’t going to be likely in the current climate, but even a small hourly rate increase could make a difference.
5. Self-employed? Get your accounts up to date
6. Have a chat with an advisor
With the new normal of social distancing, an in person meeting with an advisor is off the cards, however that doesn’t mean a face-to-face meeting isn’t possible.
To have a chat with a first home buyer advisor, please complete the below form: