6 Money tips for first-time home buyers
Published on Wed May 23 2018 in Money
Buying a first home is a big and exciting step! It also requires careful planning, and perhaps taking a closer look at your personal finances. Getting financially fit may seem complicated, but it doesn’t have to be. With a few simple steps, you can be well on your way to owning a home!
1. Pay off other debts
The first step to home ownership for many Kiwis is fixing up their finances. Paying off (or drastically reducing) debts will allow you to put more money towards a deposit and mortgage payments.
Focus on “bad” debts, such as credit cards or student loans, and prioritise paying down loans with higher interest rates. The less money you’re paying in interest, the more you’ll have to spend elsewhere. You may also want to chip away at any car or motorcycle loans, if possible.
2. Work out a budget
Ideally, everyone should create a monthly budget—or review their existing one—before house hunting even begins. Knowing how much you can reasonably afford will narrow down what and where you can buy.
If your current budget puts your dream home out of reach, it may be time to rethink your spending. Cutting back on entertainment, dining out or other optional budget items may be necessary.
3. Boost your house deposit
Most lenders require a minimum deposit equal to at least 20% of the amount you’re borrowing. There are some exceptions, but the bigger the deposit, the less you’ll pay in interest over the life of the loan.
Your budget review may have uncovered some surprises. People are often shocked by how much they’re spending! Whilst permanent cuts may not be needed, temporarily cutting back on non-essentials can help you boost your house deposit.
4. Factor in “hidden” home buying costs
Buying a home is more than just putting down a deposit and signing the paperwork. There are many one-off fees that can inflate the initial cost.
Saving for things like conveyancing, hiring a truck or movers, or utility connection fees can remove some new home buyer stress. Also, take into consideration any renovations or redecorating you’ll be doing right away. If you can’t wait to make these changes, then you may need to include the expense as part of your purchasing costs.
5. Remember ongoing bills
You’ve saved your deposit, calculated the mortgage repayments and considered all the fees that go along with buying a home. You’re set right? Almost… there are other ongoing bills that come with homeownership to consider as well.
Insurance—house, contents and possibly mortgage—will need to be added to your monthly budget after purchasing. You’ll also have council rates to pay, and strata fees if you buy a unit or townhouse. Newer homes shouldn’t require significant maintenance right away, but if you’ve bought an older home, work may be needed sooner rather than later.
6. Think about life insurance
Once you’ve purchased your home, you’ll probably want to protect it. Home owners insurance can cover damage caused by fire, flooding and other accidents. But what would happen if you were to pass away unexpectedly or be diagnosed with a terminal illness—would you be leaving the mortgage repayments to your partner?
Life insurance is designed to help protect your family’s lifestyle if the worst were to happen to you. A benefit amount large enough to pay off the mortgage (or make a significant dent in it) could help keep the house after you’re gone.
Planning ahead can make a big difference when buying a home. Learn more easy ways families can save, or tricks to slashing your grocery bill.
About Author: Momentum Life is a leading provider of Life insurance and Funeral insurance in New Zealand.
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