Investing in property tip one: make sure your home and contents insurance is up to scratch
When investing in property, such as buying your first home, the most obvious form of protection for your new asset is home and contents insurance. The insurer agrees to compensate you for a loss – such as a broken window – rather than you having to pay for the repair yourself. You pay an annual premium (the insurance payment) to the insurer, in exchange for the policy. There are many options, some much better value than others, so make sure you check out the home and contents insurance market before locking in a policy. You’ll want to be sure that your home is protected in the unfortunate event of a break-in or accident.
Generally, lenders will require you to arrange house insurance as a prerequisite for finance. However, that doesn’t mean you can’t change provider down the line, if you find another option that better meets your needs. A word of caution, though, avoid the temptation to choose home insurance simply on price. If you do have to make a claim, you want the process to be as painless as possible and to know that you’re fully covered.
Because we know how helpful it is to hear from people who have actually used the services of an insurer, we ask New Zealanders to weigh in. Canstar surveys New Zealanders on their level of satisfaction with home and contents insurance providers. To see how insurers stack up, you can check out the results of the latest survey, below:
Investing in property tip two: pay more than the minimum on your mortgage repayments
Home loan interest rates might be low now – and are expected to stay that way for a while – but don’t expect them to stay low forever.
While it’s easy to get into the habit of paying the minimum mortgage repayments required by your lender, if you can afford it, it makes sense to pay a little bit extra while rates are low. Reducing your mortgage now, while borrowing is cheaper, will leave you in a better financial position in the face of future rate rises.
By building more equity in your home now, not only will it mean you’ll have less to pay should rates increase, it will also allow you to redraw more on your mortgage down the track, for example to pay for renovations.
If you can’t afford to make regular extra payments, it’s still worth considering paying off chunks of your mortgage whenever you can. For example, put a tax refund or a work bonus to good use – every extra payment helps pay off your mortgage faster.
It’s also a good idea to keep a close eye on what’s happening with rates in the home-loan market. Knowing what home loan providers are offering will put you in a stronger position when it comes time to renegotiate your loan. To compare the rates, features and fees of home loan providers, check out Canstar’s home loan comparison tools, below.
Investing in property tip three: make sure you have life insurance
Entering big financial commitments, such as taking on a home loan, also means assuming some new financial responsibilities. You need to have an income to service the loan, but what happens if that income stops, because of accident or illness?
This is where life insurance comes in. Life insurance isn’t just about cover in the event of death; it’s a suite of products that includes trauma, total and permanent disablement, packaged life insurance and income protection. Canstar.co.nz has further information on what to consider with life insurance, as well as how you can purchase it.
The tips above are not to frighten you, but to give you some important financial points to keep in mind. That way you can get back to enjoying your new home knowing that your biggest asset is as safe as houses.