When buying your first home the big cost you focus on saving for is understandably the deposit. However, it’s also important to remember that there are other costs in the home-buying process and ensure you have money set aside to cover them.
A LIM report is a Land Information Memorandum report, and it is produced by the council which governs a property. It covers everything the council knows about the property, including important information like zoning, resource consents, whether the property or any trees on it are protected, and a lot of other relevant information.
It is important to get a LIM report for any property you are interested in buying, and to look it over with your lawyer. The cost of a LIM report depends on the council which issues it, but is generally between $250 and $400.
A pre-purchase building inspection is a top-to-bottom, non-invasive visual inspection of a property. The inspection is to identify any significant defects, overdue maintenance, possible future problems, poor building work, or other areas of concern. While an inspection can’t detect every problem with a house, it is important to get any house you are interested in inspected to spot if there are likely to be expensive issues down the track.
While there are no formal qualifications or training required to be a building inspector, the New Zealand Institute of Building Surveyors is an organisation that specialises in coordinating and regulating pre-purchase building inspectors. Using an inspector who is an NZIBS member is a good way of ensuring your inspector knows what they are talking about and uses the official forms.
A building inspection usually costs between $450 and $1,200, depending on the house and the quality of the inspector.
A lawyer is a necessary part of the home-buying process, but they can be costly. Depending on the lawyer or firm you use you may pay an upfront fee or by the hour. These fees usually start at around $1000 and can extend to over $2000.
Loan application fees
Some lenders charge loan application fees of around $400, but this will depend on which lender you end up going to for your mortgage.
All lenders will require you to insure your property as a condition of your mortgage. The cost of this is based on the value of your house. It’s also a good idea to look at mortgage protection insurance and life insurance as well. These things are all worthwhile to have but can become expensive.
Registered property valuation
A registered property valuation is when a registered property valuer makes a determination of the market worth of the house or property. The valuer comes up with the worth of the house by doing a thorough inspection of the property, looking at zoning and resource consents, and analysing the market and other comparable house sale statistics.
Most lenders will require a registered valuation before they issue a mortgage, as they need to know how much the house is worth and how much they can loan you.
A property valuation costs around $600 to $1000 depending on the size and location of the property.
Types of ownership
House and land, you own the whole thing.
You own the house or apartment, but you don’t own the land – instead you pay yearly to lease it.
There are different types of leaseholds, but a commercial leasehold is the one you should be most cautious about. Many apartments are operated on commercial leaseholds, and advertise a very low leasehold rate for the first year – then the next review comes and the price goes up by 100%. The important things to find out are how long it is till the next leasehold review and how much the increase is likely to be.
Banks will often loan less money towards a leasehold property than freehold.
This was a popular way of subdividing property a few decades ago. Essentially you own a share of a freehold title. There may be conditions on the title as to what you can do with your house, and your neighbours might have to approve any renovations – so it’s worth getting a lawyer to review the title.
Strata or unit title
This type of ownership is common for townhouses and apartments. You have ownership of your unit and an undivided share of any common areas. You will have to pay body corporate fees to fund the upkeep of those common areas, plus things like building insurance.
Welcome Home Loan
The Welcome Home Loan is offered by specific lenders and supported by Housing New Zealand. It is designed to assist people who can make the payments on a mortgage but are having difficulty saving a large deposit.
With a Welcome Home Loan, you only need a 10% deposit, and your loan is underwritten by Housing New Zealand. To be eligible for the loan you need to meet all of the criteria for the HomeStart grant, except for being a KiwiSaver member, plus the specific lender’s borrowing criteria.
KiwiSaver HomeStart grant
Along with being able to withdraw money from your KiwiSaver account, members are eligible for a grant of up to $5000 each if you meet the following criteria:
· Have contributed at least 3% of your income to KiwiSaver for at least 3 years.
· Have 10% deposit including the grant.
· Have a before-tax income of less than $85,000 for one person, or less than $130,000 for two or more people, in the 12 months prior to applying.
· Be planning to live in the house for six months after purchase.
· Be buying a house under $600,000 in Auckland, $500,000 in other major metropolitan areas, or $400,000 throughout the rest of New Zealand.
· Or be building a house worth under $650,000 in Auckland, $550,000 in other major metropolitan areas, or $450,000 everywhere else.
If you qualify you are eligible for $1000 per year you have been in KiwiSaver, up to a maximum of $5000. If you’re buying with another person and are both eligible you can get up to $10,000 in total.
If you’re buying a new-built house, or building a new house, you are eligible for $2000 per year you have been in KiwiSaver, up to a total of $10,000, or $20,000 if you’re buying with another person.