How to know if you can afford to buy your first home

It’s growing ever more difficult to afford your first home in New Zealand as prices rise and competition grows.

Buying your first home is a big step and it can be daunting. You’re unsure about how the whole process works and you’re probably worrying about whether you can commit to something for such a long time. And that’s without even mentioning the scariest part of all: how much it all costs.

But for those of you who feel like you don’t really have a clue about any of this, we’ve put together a handy guide to help get you ready for buying your first home.

Decide on your deposit.

Most people don’t have the cash to pay for their first home in its entirety. That’s why you put down a deposit as a contribution to the value of the property and take out a mortgage to cover the rest.

You usually need around a 20 per cent deposit — for example, if you want to purchase a home worth $400,000, you would be required to pay $80,000 up front.

Some lenders are willing to accept a deposit of 10 or five per cent, so you should speak to a mortgage advisor (more about that later) to go through your options.

first home

Supplement your savings.

Along with your savings, there are other ways support your deposit. If you meet certain criteria, you could secure a FirstHome grant of up to $20,000 through Housing New Zealand. KiwiSaver members should look into the scheme’s deposit subsidy and savings options.

You could also consider entering into a shared ownership agreement with friends or family.


Balance your budget.

Once you know how much money you currently have, you need to work out how much money you will have — which will determine how much of a mortgage you can repay each month.

You need to factor your monthly income against all the outgoings you expect to have once you’ve bought your property. This should include your travel expenses, food, memberships and socialising as well as the costs of your new home: utility bills, insurance, interest on your mortgage, body corporate fees and general maintenance.

Budgeting tools like this are a good way to help with this part.

Manage your mortgage.

Using a mortgage calculator, you can get an idea of what your mortgage repayments would be and for how many years you would be paying it off. It’s likely to be higher than your current rent but the benefit is that you’re paying off a capital investment.


Ask advisors.

Mortgage advisors help source the best deal from lenders and the great thing is that their fees are paid for by the lender, not you. There are different ways to structure your loan and advantages from specific lenders — so it’s worth speaking to an advisor.

Pre-approved finance.

Banks can provide you with a free home loan pre-approval. It’s subject to certain conditions but essentially the lender will assess and confirm the amount that they would be able to lend you.

This gives you your maximum budget for your house-hunt and you’re ready to start looking for your dream home.

Once you’ve been through these steps, you’ll be in a pretty good position to start getting in touch with real estate agents, viewing properties and even making offers. That’s the exciting part!

first time buyer

If you’ve decided where you’re looking to live, check out the latest listings in the area:

Alexandra           Balclutha            Cromwell            Dunedin               Queenstown      Wanaka

And contact us here if you’d like any more information.