Your Guide To Buying Your First Home in 2025
Your Guide To Buying Your First Home In 2025.
The prospect of purchasing your first home can be both exciting and overwhelming. With the ever-changing housing market and fluctuating interest rates, it's important to be well-informed and prepared.
In this article, I'll provide you with some valuable tips and strategies to navigate the process of buying your first home in 2024.
From understanding the market conditions to financing options and government schemes, I've got you covered so let's dive in!
Overview of the Housing Market
The housing market in New Zealand has experienced significant fluctuations in recent years.
Currently we are seeing lower prices which widens the range of properties available for first home buyers.
You may be able to get a property with more bedrooms or a standalone house rather than a townhouse or apartment.
Lately, there has also been a noticeable increase in the number of mortgages approved for first home buyers, indicating a potential shift in the market.
Additionally, CoreLogic's First home buyers well placed for 2025 | CoreLogic New Zealand highlights that first home buyers continue to hold a record high market share, despite affordability pressures and tight lending conditions.
Impact of Interest Rates
One of the most positive trends for first-time buyers is the expectation of lower mortgage rates in 2025. This trend of falling interest rates is expected to continue throughout 2025, making mortgages more affordable for new entrants to the market.
Preparing to Buy - Understanding the Process
Before diving into the housing market, it's essential to familiarise yourself with the home buying process. Talk to friends or family members who have recently bought a home and seek advice and guidance from a Mortgage Adviser. The more you know up front, the less overwhelming the process will be.
Pre-Approved Finance
Buying a home is a major financial commitment, and one of the first steps you should take is to get pre-approved for a mortgage.
Pre-approval is a process where a lender assesses your financial situation and determines how much money they are willing to lend you for a home purchase. One of the biggest advantages of having a pre-approval is that it gives you a clear understanding of your budget.
With a pre-approved loan amount in hand, you can confidently search for properties within your price range, saving you time and avoiding disappointment.
Research and Due Diligence
Once you have that pre-approval in hand, do your homework before entering the market. Research property listings to gain insights into the selling prices in your desired area.
Compare recently sold properties to understand the market value. Attend open homes and auctions to get a feel for the current market conditions. This research will help you feel confident to make informed decisions and negotiate effectively.
First Home Buyer Financing Options
It is still quite challenging to get finance if you have less than a 20% deposit. That's not to say it can’t be done, but if you are looking to borrow with less than 20% deposit it can be a lot more difficult & expensive. So why is a 20% deposit more favourable in the eyes of the bank?
It all comes down to risk. By having a larger deposit you are perceived as a lower-risk borrower, resulting in more favourable borrowing terms such as access to discounted interest rates and not having to pay low equity fees. Additionally, for you the borrower, a higher deposit means a smaller loan amount leading to lower monthly repayments and reduced interest costs over the life of the loan.
Banks also have some restrictions around how much money they can lend to borrowers with less than 20% deposit. Currently, they can allocate only 15% of their total lending to low-equity borrowers. This not only severely restricts the amount of funding available, but it also means that low-deposit borrowers may face more stringent requirements and potentially higher interest rates and fees imposed by the banks.
By working closely with your Mortgage Adviser early on in the process we can look into other ways to boost your deposit to get you out of the high risk zone.
Here are just some of the ways you can boost your deposit to get you onto the property ladder sooner:
Co-Ownership with friends or family
Co-ownership is a different way to get into a property, by teaming up with friends or family members. It offers an opportunity to make home ownership more affordable and attainable, especially for those who find saving for a deposit challenging. By pooling resources, co-ownership allows you to share the costs and responsibilities of buying a property, making it an attractive option for many.
First Home Loan
With a First Home Loan, you only need to provide a 5% deposit, making it easier for you to purchase your first home. The 5% can be made up of:
Your KiwiSaver first-home withdrawal
Money that you have saved in the bank
Money you have already paid towards the property
A gifted amount from a close family member
First Home Loans are backed by Kāinga Ora which are exclusively provided by specific banks to allow for lending options that may not align with their typical lending criteria so make sure to talk to a Mortgage Adviser first to get the right option for you.
Buying your first home is an exciting milestone, and with the right knowledge and preparation, you can navigate the process successfully.
Working with a Mortgage Adviser can provide you with expert guidance and support throughout the home buying journey. I can help you secure a pre-approval, negotiate interest rates, and navigate the intricacies of the buying process.
Remember to be realistic, compromise when necessary, and stay informed about market trends.
With determination and the right support, 2025 could be the year you become a proud homeowner
Feel free to reach out if you need a hand!👍
