Funnily enough, lenders generally don’t lend 100% of a mortgage – so you’ll need to stump up a deposit for your new home.
And it’s not rocket science – the more money you can save for your deposit, the less you’ll have to borrow and the less interest you’ll have to pay.
With property prices on the up, that means getting on with a plan to save.
Lenders usually require a 20% deposit, though some offer low-equity loans of up to 95% of a property’s value.
While getting 95% of a home loan is tempting, it’s also risky – if property values drop by 10% you’ll end up owing more on your property than what it’s worth or what you could sell it for.
Saving for a deposit can seem harder than climbing Mt Cook, especially if you’re paying rent as well. But once you’ve gotten into a saving habit and have started to save some serious coin, you’ll see your deposit grow quickly. This will also get you in the routine of paying off your home loan.
You could try an automatic transfer to a savings account on pay day, so it’s gone practically before it arrives.
Grow your deposit quicker
If you’re looking to buy your first home, can afford home loan repayments, but can’t save the 20% deposit, you could be eligible for a Welcome Home Loan, which is up to 90% of a property‘s value (up to a house price cap that varies by region). The lending criteria is different to standard loans; there are income and house price limits.
Are you a KiwiSaver member?
You could be eligible for a HomeStart Grant of up to $5,000 for individuals and up to $10,000 where there are two or more eligible buyers, to put toward buying an existing/older home. If you’re buying a brand new home, you could get up to $10,000 for individuals and up to $20,000 where there are two or more eligible buyers.
You might also be able to withdraw some of your KiwiSaver savings to put toward buying your home.
Got it, keep it
Of course it’s not just about saving the cash, there’s also an art to keeping your dollars once you’ve got them – otherwise you’ll find it slipping away like butter off a hot knife.
Each time you reach a savings goal, e.g. $2,000, you could put it in a term deposit so that it’s safe and also earning a higher rate of interest. At the very least, create a separate account to transfer it into that is inaccessible from your day to day spending and preferably from online banking.
This information is not intended as a complete guide, as it doesn’t consider your individual needs or financial situation. Trade Me accepts no responsibility or liability for any inaccuracies or omissions in the content. Always obtain independent legal advice before buying or selling property.