Tag: first home

Are you buying your first home? | Part 3

Now that NZ is in Level 3 of the COVID 19 reponse program, and hopefully will move to level 2 soon, everyone can start their search for the forver home or investment. With the amazing homeloan rates, and newly relaxed first home buyer regulations, I’m sure there will be more opportunities for everyone who is looking to climb the property ladder. This is the part 3 of my seiris on tips to help you through the process. Don’t miss the first and second parts of this seiris :).

Property search is tedious task. It is time consuming, resource consuming and energy consuming. But all that consumption is necessary. The more your research, the better the chance of finding what you need. However, this process can be made a little easier with a buyer’s realestate agent or simply a buyer’s agent. We also recommend finding your potential lawyer at the outset. More details given below 🙂

A buyer’s agent

A buyer’s agent acts as exactly what the name suggests – an agent for the buyer. Real estate agents not only act for the sellers, but for the buyers too. Once you have your finances sorted, and before starting the property hunting process, talk to agents who are willing to help you out with the process. A buyer’s agent can help with arranging private viewings, finding relevant documents for a property, and even putting forward an attractive offer once you are convinced to go ahead. Agents are also very useful in getting information that you may not otherwise get or is difficult to source. For example, extra documentation that you may want, private viewings at your convenience, information about potential offers, or interests, price expectation for a property. We also learnt quite a few tips and tricks of the trade from our agents.  But the biggest advantage of having an agent is you receive information about potential properties even before they appear on public listings. This can reduce the competition for good houses. 

You do not need to stick to one agent; you can use the services of multiple agents. If you are using multiple agents, find ones from different agencies. However, too many agents will defeat the purpose, because no agent will be motivated to help you because they may end up not getting any return for their efforts. So one or two is ideally the best.

Once again buyer’s agents get paid when a sale is made through the vendor’s agent unless you entered into an agreement with other arrangements. The downside of being paid by vendor’s agents is that they always may not be keen to work with buyer’s agents because their commission will have to be divided. In such cases, you’ll have to make a judgment call and decide how to proceed. In our case, we decided to go ahead without our agent, but the decision was made transparently, after discussing it with our agent.

We recommend (#notsponsored): We worked with Tania Ikin. She comes highly recommended by us. Tania helped us look at quite a number of houses and was nothing but encouraging and supportive throughout. We were quite adamant about our requirements and she never tried to convince us otherwise. Unfortunately, when we found the house we wanted, the seller’s agent did not wish to go through her; but she was kind enough to suggest that we go ahead without her. This is an excellent example of her professionalism and ethical integrity.  

A lawyer

The service of a lawyer comes in once you get an offer accepted. However, many do not realise that you need to have your lawyers sorted even to make an offer. Once you found the house, you will need to have the details of your lawyer ready to go on the sales and purchase agreement (S&P – more details here). Sometimes, once you found the house that you are interested in, there may be only 24hrs or less to make an offer if it is highly in demand. Therefore, while we do not recommend making offers without having your lawyer go through the S&P, you may not have time to find and consult a lawyer before doing so. We highly recommended having a quick discussion with a potential lawyer about your rights before starting the house-hunting process. Costs and when to pay for lawyers might be different from firm to firm. however, most lawyers would charge only if the S&P was accepted and you are proceeding to the next steps.

We recommend (#notsponsored): Sathiya Muralitharan from KTLaw comes highly recommended from us. She is multilingual and therefore, can explain legal terms in your native language (if she speaks it J). She was responsive and professional. Most importantly, she is capable of dumbing down legal jargon for us laymen.

Once you have these sorted, you are all set to start looking for your future home. Even though the above are not necessarily prerequisites to the property search, we recommend having them sorted early on to help you in the process.

There are many websites to keep an eye for potential properties. We found TradeMe (#notsponsored) to be the easiest because you can add filters to sort through 1000s of property and set up alerts when new properties come to market that satisfies the filters. However, keep an eye on agency listings, and other real estate webpages like realestate.co.nz and homes.co.nz just in case.

The next article of this series will bring the most important tool we used for our property search. It was used to assess the houses we viewed to objectively (to some extent) decided if they suit our requirements. The aim was to remove the personal bias and emotional influence that we may have when making a purchase decision. We will also explain why such a tool was necessary to identify our future home. Stay tuned!

Cheers,

Sithru

Are you buying your first home? | Part 2

Do you need a Mortgage Adviser?

2 Now that you have an idea about what you can afford to pay as mortgage repayments, the next step is to decide how much your actual buying power is – how much are you realistically able to borrow from the banks to buy the house. It is way easier to get the services of a mortgage adviser during this phase to do the hard work.  

If you are doing it yourself, here’s how it is done.

Things you need: your income, expenditure, assets and liabilities.

In simple terms, how much money comes in (e.g. salary, rental income, profits), how much of it do you spend (e.g. bill payments, groceries), what items of value do you possess (e.g. savings, gold, vehicles) and how much do you owe (e.g. loans, credit cards, hire purchases). You also need an amount of cash (Savings) that is readily available as your deposit. This will be the down payment for the property.

Once these are figured out, you need to go to lending institutes to find out how much you are eligible to borrow. Institutes can be banks (highly recommended) or other financial entities that are legally allowed to lend. They evaluate the values you put down plus some other numbers such as your credit rating and decide whether you can borrow money at all, and if so, how much. 

Why doing it yourself is hard:

  • Having to face rejections (multiple times)
  • Hefty amount of communications and long waiting periods to get results
  • Time consuming
  • Emotionally draining

You may not get approved for finance right away (you are lucky if you do!). Even if you are successful in your first attempt, you may need to fish around to get a good deal. This process is not only time consuming but also emotionally draining at times especially if you get rejected by multiple banks. You also have to fill multiple applications that have different formats from one another. That is just the beginning! You also need to carry out regular communications with each party and wait a long period of time to hear back. With a day job and other personal responsibilities at hand, having to going through this repeatedly is not fun (trust me on this!). You will end up exhausted at this stage even before the good part begins.

Finding a competent mortgage adviser makes your life so much easier at this stage. The first good thing about a mortgage adviser is, their services are free to you. They get paid by the banks once a mortgage is finalised.

Secondly, they would be experienced enough to tell you how much your buying power is and what you could do to improve if needed, even before going to the bank.

Thirdly, with their experience, they know which banks have reserves to lend money at present. Which cuts down the urge to go to every bank possible.

Finally, they will do the leg work for you. They already have established relationships with banks which allow them to communicate much easier and quicker. They will be able to get you pre-approved for a mortgage which would be a plus point when making offers. With a mortgage adviser, you’ll get results much easier, especially when your offer is accepted and are ready to apply for the mortgage. At this stage, they can offer you advice on loan types and loan terms to consider.  

Having said that, there are times when you feel it is better to have first-hand control of the process because you become reliant on a third party (adviser) for communications with the banks. Especially, when the mortgage applications are processing, banks take at least 5 working days to process. Then they communicate the results to the adviser, and you hear it from them. If there is anything to be negotiated, you need to go through the mortgage adviser to the bank which seems like an eternity to get results. Such waiting periods in between can agitate you if you are someone that is used to take control and steer things.

My recommendation is, do use a mortgage adviser, even if this is the case.

However, find one that is extremely competent, that does not need to be told what to do and one that is proactive. Talk to previous clients of mortgage advisers if possible to find out how they performed during the application process. Written reviews online might say they achieved the final goal – a mortgage, but the process of getting there may not have been smooth sailing. At the outset, explain to them you need regular communications during the process, even if the only update they have is ‘no updates from banks’. However, set a reasonable frequency for such communications that is agreeable to both parties. 

Stay tuned for more tips on property searching!

Cheers,

Sithru

Are you buying your first home? |Part 1

General Tips for the process

Based on our experience there are certain things that we recommend you do before even starting to look for your dream home – finding out the mortgage payment you can afford, Getting the services of a mortgage adviser, a buyer’s agent, and finding your lawyer are just some of it. The services of a mortgage adviser and the buyer’s agent are not mandatory but are highly recommended to ease the pain of doing the work yourselves.  

First you need to understand that buying house is not always the best option. For some people renting is much more cost effective and helpful in the long run. Owning a house means, you not only are paying higher rent as the mortgage, but there are added expenses such as rates payments, maintenance costs, and sometimes the need to make adjustments. Having said that, I must also say, having your own house means owning an enormous asset; that is never a bad investment. However, the discussion around the decision to buy or not to buy is for another post maybe. For now, I assume you are here because you already made the decision to buy.

1 Our first tip is to find out how much you could comfortably pay weekly, fortnightly or monthly as the mortgage payment. This is only to get an idea about how much you can afford as your mortgage payment.

You can use mortgage calculators given on any bank’s web page to do the calculation (this one is easier to use). The values you need for the calculation are:

  • The general interest rate that is currently used (I recommend using the floating interest rate),
  • The deposit amount you have, and
  • The potential loan value

Different calculators ask for either the cost of the house or the loan value. Cost of the house is how much a house will be sold for. The loan value is cost of the house minus the deposit value. This is the actual amount you will be borrowing from the bank.

E.g.: If the cost of the house is $550,000, and you can afford to have a deposit of $50,000, then your loan value is $500,000.

At this point in the process you may not have a clear idea about any of the actual values for house cost, loan amount or the deposit. Nevertheless, play around with estimates.

A general rule for your deposit is that it should sit somewhere between 10-20% of the house value. So it pays to know exactly how much you can put forward as the deposit before starting this process. There are multiple ways to accumulate a deposit. One is to save rigorously; Secondly, you can turn to parents or close relatives for a donation/gift (this cannot be a loan); or you can explore the grants available through KiwiSaver (or equivalents in your country) for first home buyers (sometimes available for second homes too). In reality, your deposit may have to be a combination of savings and either one or both of the other options.

We recommend doing the above mortgage calculation to figure out if you can afford to pay a mortgage at all, and if so within which range. Feel free to play around to find a number or a range, that you are comfortable with. At the end of the day, once you pay off all your bills, other mandatory expenses, and mortgage, you still need to have a comfortable amount left from your salary for emergencies and unexpected expenses.

This information is relevant to the New Zealand context. but you can apply the fundamental idea in any context.

Tell us in the comments below how the process goes in your country. Would love to hear more.

Stay tuned for the next tip in the series – Should you use a Mortgage adviser?

Cheers,

Sithru

Photo credit: http://www.interest.co.nz

Are you buying a house? Then you need to know these!

With the record lowest mortgage rates in the country, the property market is soaring since recently. We too decided to take advantage of this and buy our first home in New Zealand. Our journey to finding our future home was not of course smooth sailing but we used certain tactics on the way to minimise the stress. Since our process helped us immensely throughout the journey, we* decided to share our experience as a series under Sithru Life.

In part one of this series that follows (stay tuned!), I will share some general tips that might of use before you start the entire process. You could expect to hear some information about mortgage advisers, buyer’s agents, a cool tool we used to assess the house we viewed, and many more in the coming series. so stay tuned!

The aim is to post two to three tips a week. However, please hit ‘follow’ on the top right hand sidebar to get notified when a new post goes up!

Disclaimer: This series is only intended as a way to share our experience. This should not be taken as legal advice. Please visit settled.co.nz (or an equivalent source in your country) for legal information about the house purchasing process. 

(*I say ‘we’ because my partner is a silent collaborator in this series)

Photo credit: https://homesellingzinewebsite.puzl.com/