Questions to ask yourself before buying your first home

Buying your first home is one of the most important life decisions and transactions you’ll make. It would be wise to take a minute and sit down to ask yourself some serious questions to ensure you are ready and prepared to make the big move. This will not only help you in gaining a better understanding of your situation, but also give your agent an idea of what your property search and realistic options look like. Naturally, if you’re thinking about buying your first home, you’ve probably spent a good amount of time looking around the market to see what’s available. Now it’s time to start asking the right questions.

How much can you realistically afford?

To place yourself in the most realistic position possible, you need to take a look at that savings account and ask yourself how much you can afford to spend on a house. Most lenders ask buyers for a 20% deposit before they grant a home loan to pay for the property. Aside from your mortgage there are other components you will need to pay for along the way including; legal fees, insurance and building checks/reports.

The Government offers financial help for first home buyers provided they meet the criteria and have an application accepted. You can read more about the specific details of the First Home Grant and KiwiSaver first-home withdrawal here

Your pre-approval amount is a limit, not a target. You need to make sure you can afford your deposit as well as your monthly mortgage payments, else you risk the possibility of losing your home.

What are your long term goals?

Take some time to imagine your future and where you want to be in 5-10 years time. Where would you like to be and where will your future job take you? Will you have a family or pets that lead you to think about school or day-care? Are there other things you are currently saving for?

Upon answering these questions you will be able to narrow down important factors such as location, the size of the house and whether purchasing a home right now is the right decision. You may have numerous long-term goals, it’s a matter of deciding which comes first and which can wait a bit longer.

How important are future returns?

What is the purpose of buying your first home? Do you want to benefit from capital growth or are you looking for a forever home? Establishing whether you are looking for a starter home with the intention of selling in a couple of years or looking for your forever home will impact your house hunt. You may be able to settle for a house that is not quite perfect, but meets your budget and you can see yourself living in for the short term.

If you’re looking at a short term house, could you see your purchase as an investment rental property? If you decided you wanted to go travelling or your job took you elsewhere, you may want to think about the possibility of renting your property. Whether you are living in your home or not you will still be required to make your mortgage, rate and insurance payments.

Are you ready for the responsibility?

Owning your own home comes with many responsibilities you wouldn’t have if you were renting. Ensure you have funds put aside solely for home repairs in the event that something goes wrong and needs immediate fixing.

There will be some sacrifices that you will need to make. For example, if your interest rates increased or you needed a new fridge, you may have to sacrifice that holiday you have been planning as that amount spent will now need to cover your increased costs.