Buying a home
For some migrants, part of feeling that you have settled in New Zealand is buying your own home.
There are many things to consider when looking to buy including how you will pay for it, getting a home loan and finding the right type of property for you.
Types of homes
There are many types of homes for sale in New Zealand. It is helpful to understand the terms used most often to describe them in advertising, so that you know what to expect. Common terms include:
- Villas and Cottages – these were generally built around the 1900s and usually have wooden weatherboards. The villas are larger, often with bay windows and high ceilings. Cottages are smaller, usually with one or two bedrooms. A lot of these older “character” homes have been updated inside, but some may be in need of expensive repairs to wiring and plumbing.
- Bungalows – from the 1920s to the 1960s this was the main type of house built. Most of these are large, one-story, three bedroom homes with wooden weatherboards. Some have been modernised, but many are in need of upgrades.
- 1970s houses – boxy, often two-story houses that are functional but without much character. These usually have weatherboards.
- Townhouses – these more modern homes are often joined to other townhouses and are sometimes described as “semi-detached”. They are usually two-storied or three-storied. The outside is usually clad in a pre-fabricated material rather than wood. Townhouses are generally on sections with small courtyards and little or no garden.
- Apartments – more people are living in cities so new apartment buildings are being built and some older commercial buildings, such as warehouses, are being converted into homes. This is low-maintenance living, although fully-equipped American-style condominiums are still rare.
A word of caution: Many homes built in the 1990s and early 2000s have had problems with leaking due to poorly-treated timber being used. If you are considering a house from this time, have it closely inspected for water damage and find out if repairs have been made.
In New Zealand house prices are set by negotiation between buyer and seller, or by auction or tender (where buyers must make written offers by a certain date.) An indication of the price the seller wants is sometimes given. For example, BBO $320,000 means Buyer’s Budget Over $320,000. Another indication of price is the government valuation (GV) or rateable value (RV). You can pay for a valuation report from a registered valuer, or get online property information from the government agency Quotable Value.
Remember to be realistic – houses in New Zealand are more expensive now than ever before. This is especially true in growth areas such as Auckland and places with housing shortages such as Christchurch. It is possible that you will not be able to afford your dream home right away. Think about renting or buying something cheaper at first and moving on to a more expensive home later. Apartments and townhouses can be a less expensive way to start. They also help to build your New Zealand credit rating.
Home loans (mortgages)
When looking to buy a house you will probably need a home loan (mortgage) to pay for it. Most people go to a bank for these loans and use their new property as their security/collateral. If you are new to the country, you will not have a New Zealand credit rating which can make it difficult to get a loan.
You can get independent information about mortgages from the government’s Sorted website. The site lists current interest rates, lets you calculate how much you could borrow and provides tips on how to reduce the amount of interest you pay. There is also a checklist to compare various mortgages.
Mortgages are offered by banks and a variety of other lenders including building societies, finance companies and specialist home loan companies. You can approach them directly or use a mortgage broker who will help you negotiate. You generally do not pay the broker, but be aware that not all lenders deal with them.
Some lenders will charge a fee to apply. They may impose other conditions on the loan such as income protection insurance. The lender has a legal right to repossess your property if you do not meet your mortgage payments.
Under current rules most banks will require a deposit of at least 20% of the house price. If you have sold a house before moving, or have other money, think about using that to help pay for your new home. This will mean you ask the bank for less money, and they will be more likely to say yes.
Some banks have managers who work specifically with migrants. Ask if your bank has someone who can help you to meet their loan requirements. Many lenders can also offer advice in different languages.
When approaching a bank or other lender it is a good idea to:
- Bring documents from home – the bank will want to know about your financial history. Bring as much information with you as you. Make sure you have at least three months’ worth of bank and loan statements (if you were paying off a loan) from before your move. This will show whether you were in a good financial situation before migrating. If the bank is still not sure about your past, they can get an international credit check. This will reveal any bad debts you left behind, so be honest about any past problems.
- Prove you can pay – bring documents that clearly show how much income you have in New Zealand. The bank will want to see that you make enough money to cover your loan payments plus your other expenses. If you have sources of income other than your job, bring documents to show how much you will earn.
- Show them your assets – even if you don’t have a large income you may be able to get a mortgage if you have other assets. If you own property in your home country, or have other investments that you could use money from, this will show the bank that they will be able to get their money back from you.
There are several types of mortgage available in New Zealand:
- Table loans (the most common) – most of the early repayments go to pay interest and most of the later payments pay off the principal.
- Revolving credit loans – these work like a large overdraft. Your income goes straight into the mortgage account and your bills are paid out of it. This keeps your loan as low as possible, reducing the interest you pay.
- Straight line or reducing loans – you repay the same amount of principal with each payment, but the amount of interest you pay reduces over time.
- Interest only – you do not repay the money you have borrowed until an agreed time, although you do pay interest.
There are two main types of interest rates, fixed and floating. Learn how the interest rates work before deciding on which type to take up. Fixed rates will remain the same for an agreed term, usually 1-5 years. Floating rates will go up or down according to market forces.
Loans for New Zealand residents
The government has a number of schemes to help New Zealand citizens and permanent residents buy their first home. These include the Welcome Home Loan, FirstHome, and KiwiSaver first home deposit subsidy and savings withdrawal schemes.
- Welcome Home Loans are available through banks and allow certain buyers to get a loan with a deposit of only 10%.
- FirstHome entitles eligible lower income buyers to a grant worth 10% of the total purchase price of certain houses, mostly in provincial areas.
- KiwiSaver first home deposit subsidies are worth $1000 for every year a buyer has been contributing to KiwiSaver, to a maximum of $5000 for one person or $10,000 for two.
- KiwiSaver savings withdrawals allow certain buyers to take their personal and employer contributions out of their KiwiSaver account to use as part of a deposit.
There are terms and conditions around all of these schemes and you read more on the Housing New Zealand website
Although it is not a legal requirement to use a lawyer, it can be a good idea if you are not familiar with the process. You can hire a lawyer early in the process so you have someone to help when you find a property. Your lawyer will handle the legal side of the transaction and typically charge $600-$1000 for standard conveyancing. The lawyer can help you negotiate a purchase price, check the contract, complete a title search, and arrange the payments. They will also advise you about tax implications and keep you informed of your risks, rights and obligations throughout the process. There are lists of specialised conveyancing lawyers available on the Law Society's website, or you can look under “Lawyers” in the Yellow Pages.
Offers are made using a written Sale and Purchase Agreement. This document goes back and forth between the buyer and seller until a price is agreed. It is also a good idea to include conditions in the agreement so you can check that everything is fine before buying the property.
Common conditions to include are:
- Subject to your lawyer approving the title (the legal record of the property)
- Subject to you confirming suitable finance to buy the property
- A satisfactory LIM report (summarising information held by the local council about the property)
- A satisfactory valuation or property inspection report.
The agreement will show the date the sale goes “unconditional” (when all of these conditions have been met) and the settlement date (when you can move into the property). Once the sale goes unconditional you are legally committed to buying the property.
Whatever kind of home you decide to buy, remember to do your research and ask for advice.
QV is a provider of rating and full market valuations. They provide a range of information about the value of properties in New Zealand, some of which is free.
Sorted.org is an independent guide to managing money in New Zealand. It has a comprehensive guide for Kiwis to the financial aspects of buying a home, including information about mortgages.
The Law Society has a section on property law on their website which has a directory of lawyers in each region and general information about the legal side of buying a home in New Zealand.
Housing New Zealand
Housing New Zealand Corporation is a Crown agent that provides housing services for people in need. They have a guide to the government assistance that is available for citizens and permanent residents who would like to buy a home.