How to own your own home in New Zealand – tips without the telling off

Co-author: Dhayana Sena 

Many New Zealanders aspire to own their own home – but it is an increasingly challenging task. According to the Real Estate Institute of New Zealand (REINZ), the national median price of properties sold in October 2019 was $607,500, up 8.2% on October 2018 figures. 

These figures included a rise of 0.8% in Auckland’s median price, up from $861,000 in October 2018 to $868,000 in October 2019.

So, if you do want to break into the New Zealand property market – how do you do it? The honest answer is that it can be difficult, however, here are some tips that may help you get a foot on the property ladder. 

How to save for a deposit

In the majority of cases, the most challenging aspect of buying your own home is simply getting a foot in the door, especially when it comes to having enough funds to make a deposit. Saving some extra cash will certainly come in handy to help you save for that initial payment. 

Here are some ways you could save.

Take on supplementary work

More and more people are working multiple jobs – including taking on side hustles –  in order to make ends meet and be able to afford living costs. If you’re unable to secure a job that pays a higher salary and are looking to save up enough for a deposit on a house, getting additional work to supplement your current position should help you save a bit more. 

Working two jobs isn’t necessarily easy, though, and you’ll need to weigh up the pros and cons that could result from taking on additional responsibility. Working extra hours and sacrificing on little luxuries like sleeping in may seem doable, but can have long term negative effects if not properly thought out. 

Move back in with your parents

Though it may not be ideal for some, if you’re still relatively young, you might consider moving back in with your parents for a year or so. You’d pay less in rent and bills, and living with your parents may make it easier to utilise some of the other methods on this list.

Cut back on spending

While it’s easier said than done, cutting down on most, or even all, of your non-necessary spending could lead to serious savings if you’re diligent about it. Going out with mates, buying your morning coffee from a cafe, signing up to multiple streaming subscription services – it all adds up. It’s worth weighing up their importance vs. how much you want to be a homeowner.

An easy way to restrict yourself from unnecessary spending is to do a budget and properly account for the things you need to pay for and those that you don’t. 

Maximise what you’ve got 

While it’s important to increase and add to your savings, it’s also important to make sure that your savings are in an optimal place. Different banks offer savings accounts with a range of benefits, some of which may suit your saving needs more than others. 

Find a bank that can offer you an account that encourages savings and initiatives such as high interest rate and minimal or no fees. You can compare savings accounts for free using Canstar’s comparison tools. 

Take advantage of bargains

Buying what you need at a bargain is a great way to assist with saving.  When you go grocery shopping, try looking for cheaper alternatives if you’re used to buying name-brand products. Buy in bulk if you can, and avoid any “luxury products” you might be tempted to buy. Stick to the basics, and see if you can’t save money on the basics.

If you must make a purchase, look at clearance stores or second hand items, as they are typically much cheaper and offer the same desired use. 

Home loans: Going guarantor

Another option to get into the market is to potentially either borrow money from your parents or ask them if they would be willing to be a guarantor for you. 

It’s not a request that should be made – or granted – lightly. If your parents go guarantor on your loan, it means that they will be liable for the loan if repayments are not made, which can be a huge burden on them. To be a guarantor, it also means that your parents need to be able to demonstrate their ability to repay. You can learn more about going guarantor on a home loan here.

Pay it off!

Once you have managed to buy a home, of course, you still don’t really own it: the bank does. And by the way – make sure you compare home loans before you sign up as they can vary in cost! 

Compare home loans with Canstar

Once you have your home loan, it makes sense to get it paid off as quickly as possible. As an example, a $400,000 home loan over 25 years at an interest rate of 6.50% percent will cost around $810,000 by the time you pay it off. If you increase your repayments by, say, $300 per month though, that same loan would be paid off five years earlier at a total cost of $711,000. The same home, owned five years sooner, and costing almost $100,000 less. That’s a good savings strategy!

For further tips on saving on your home loan, check out Canstar’s article here.

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