Each year, CANSTAR researches and rates first home buyer options available to New Zealand buyers. In 2016, for an outstanding sixth year in a row, Kiwibank has taken out the First Home Buyer Bank of the Year Award. This is a major achievement made possible by Kiwibank’s all-encompassing package of loans, features, accessibility and First Time Home Buyer online educational tools, designed to help first timers navigate the complexities of property ownership.
Q: Buying a first home is very exciting – but choosing the loan can be confusing. What should first homebuyers consider when deciding between a variable rate, fixed rate or split loan?
A: It is really exciting!! We recommend they take the time to work out what impact a change in interest rate could have on their lifestyle. It’s the old saying that “it’s not the rate you pay but the rate that you pay it off” and, if the customer has the income to support a payment of more than their minimum payment, a Variable portion can be really helpful in paying that loan off faster. Fixed terms are great for certainty of repayments and can make financial planning a bit easier so our lenders work with customers to ensure they have a portfolio that best suits them.
Q: It can be difficult, first time around, to work out what size mortgage is going to be affordable. What types of things should first home buyers think about before they commit to a loan?
A: We think planning ahead is the key here. Now is a great time to be talking about this as we are experiencing historically low fixed term interest rates in NZ. But that could change quickly and customers need to make sure they have servicing room to support a higher repayment or it can really impact their financial situation and their lifestyle. In addition first home buyers should make sure they have factored in new expenses such as rates and house insurance into their budget. Our lenders always make sure they cover this with first home buyers to ensure there are no surprises down the track.
Q: How important is it for first home buyers to get personalised mortgage advice from their financial institution?
A: It is well known in banking that first home buyers appreciate more support from their lenders than people who are onto their 2nd or 3rd property and Kiwibank makes a big effort to make sure this is delivered. Talking through options with lenders will really help and many also find it helpful to discuss with a financial advisor.
Q: In the instance of parents guaranteeing their child’s home loan, are there any safeguards that you would suggest parents should put in place?
A: It is the banks responsibility to make sure that when lending money the customer will be in a position to pay that back – and Kiwibank takes that responsibility very seriously. It is really important for the guarantor to understand what they are signing up to and they should seek external legal advice if they have any questions or concerns around what is involved in being a guarantor.
CANSTAR congratulates Kiwibank on its decisive win. Readers can download the First Homebuyer Award Report here.
Kiwibank’s top tips for First Home Buyers
- If the customer has the income to support a payment of more than their minimum payment, a Variable portion can be really helpful in paying that loan off faster
- Customers need to make sure they have servicing room to support a higher repayment should interest rates change.
- Talk through home loan options with lenders and even a financial adviser.
- It is really important for the guarantor to understand what they are signing up to and they should seek external legal advice if they have any questions or concerns.