The first step in saving for a house deposit is to set a realistic savings goal – decide on how much you want to borrow and how much you want to deposit (Minimum 20%), and aim for that deposit!
Budgeting, Budgeting, Budgeting!
To create a budget, add up how much income is coming into the household and how much is going out (rent, bills, etc). The aim is to get a surplus – money left to save for your deposit. Your budget needs to personal and accurate – We all dream of saving hundreds per week, but if your budget isn’t realistic it will soon all fall apart.
Figure out your current savings and income information, such as: pay, KiwiSaver, interest on savings, allowances, etc.
Break down your weekly, monthly and annual costs: W.O.F, insurance, personal loans, rent, etc.
Review your spending: where can you save, how can you cut costs – find those areas of opportunity.
Start living as if you have a mortgage – this will help you save faster and help adjust to repayments once you secure a loan.
Track your spending: This can be done by keeping a spending diary or using an online tool/app. Then you can easily adjust the budget as and where needed.
Assets and Liablities
What can trip up a lot of first home buyers when budgeting and setting goals is not taking into consideration their assets and liabilities at the beginning of the budgeting process. Assets are the main focus for securing your loan, these are your savings, investments, trusts, cash gifts, etc. Liabilities are just as important as they can drastically affect how much you can borrow – these can include credit cards, overdrafts, higher purchases, loans etc.
These monthly repayments bring down how much household income you actually have – which in turn effects your position to take on home loan. It’s a smart move to consolidate your debt and have it paid off before you apply or even start saving as it is one of the key thing the banks will look at.
First Home Loan
If you are a first home buyer and only have a small deposit (under the 20% Minimum), the First Home Loan scheme is tailor made for you. First Home Loan is a Government supported initiative to help people who have trouble saving for a larger deposit by providing access to a loan with only a 5% deposit requirement.
The First Home Loan is an initiative supported by Kāinga Ora – Home and Communities, designed to help first time buyers onto the property ladder, but there are also additional criteria including:
You must plan to live in the house you buy – the loan can’t be used to buy a rental or investment property.
A yearly income of up to $85,000 (before tax) for one person. Or a combined maximum yearly income of $130,000 (before tax) for two or more people.
You must be a New Zealand citizen or permanent New Zealand resident.
The price of the house you are buying must be less than the regional house price cap. (Auckland: $600,000 for existing/older properties, $650,000 for new properties)
Meet the lending criteria of your bank or credit union.