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What to keep in mind as a first home buyer

First home buyers

If you’re ready to buy your first home or are saving up to do so soon, congratulations! It’s a significant milestone. Buying a home is one of the biggest purchases you’ll ever make, so it’s important to organise your finances and build a solid plan before making an offer. Here’s what to keep in mind when you’re preparing to buy your first home.


Aim for a 20% deposit

As a first home buyer looking to purchase an existing home in New Zealand, you typically need a deposit of 20%. For a $700,000 home, this would be $140,000. If your deposit is less than 20%, you may still be able to secure a loan but your application will undergo a review and a registered valuation of the property might be required. This is due to the Reserve Bank’s (RBNZ) loan-to-value (LVR) restrictions which set out how much low-deposit lending banks can make. With a deposit of less than 20%, expect higher interest rates and to potentially pay a low equity fee.

From 1 July 2024, banks will also need to comply with RBNZ’s new debt-to-income (DTI) restrictions. These DTI rules are additional to the LVR rules mentioned above and apply to new lending for residential homes. The new DTI rules will allow banks to lend 20% of owner-occupier lending to borrowers with a DTI ratio greater than 6 (6 x their annual income including any debt). For example, a household with an annual income of $180,000 and debt of $40,000 would exceed the DTI threshold if they borrowed over $840,000.

Pro tip: Aim for a deposit of 20%, but if that’s not feasible, at least try for 10% providing you can manage the repayments.


A good credit score goes a long way

Improving your credit score is key, especially now with new DTI restrictions in place. Paying off debts will help you stay within the DTI limit. Clearing your student loan boosts your borrowing power, and having a clean credit history helps too. Keep your credit card and car loan debts low, and always pay your rent, phone bills, and utilities on time. Lenders check your credit file for existing loans and missed payments. 

Before applying for a home loan, you can check your credit history on It’s also worthwhile talking to a financial adviser who can analyse your earning, saving and spending patterns, and help you make smart money management decisions that match your current needs and future goals.

Pro tip: Manage your money well for at least three months before applying for a home loan or pre-approval. Set up direct debits and automatic payments to come out right after payday to keep things smooth.


What can you comfortably afford?

While LVR and DTI restrictions guide banks on lending limits, it’s crucial to determine what you can comfortably afford. This might be less than what banks think you can. Track your income and expenses from the last 12 months to understand your cash flow and set a realistic repayment budget. For many households, borrowing more than five times their total annual income can be challenging, especially with additional expenses like childcare. Prioritise financial stability over maximum borrowing capacity to ensure a more manageable mortgage.

When working out whether you can comfortably service a loan, you’ll need to decide how you’ll be structuring your mortgage.

– Fixed-rate mortgages offer repayment stability, protecting against interest rate fluctuations over a period of time, but lack flexibility if rates drop. 

– Variable-rate mortgages allow for lower repayments if rates fall and offer the flexibility to make extra payments, but repayments rise with increasing rates.

– Split mortgages balance stability and flexibility by having part of the loan at a fixed rate and part at a variable rate. 

Structuring your home loan correctly and securing the best rates can save you thousands of dollars in interest and cut years off your home loan. Reducing your loan term will also help you save more – if you can manage higher repayments, a 25-year term instead of 30 years could be beneficial. However, your home loan structure and term will depend on a number of personal factors such as income flow and future plans, so it’s best to discuss the options with a financial adviser.

Use a mortgage calculator to experiment with different mortgage types, rates, and loan terms to understand your potential repayments, and adjust the loan amount to fit your budget comfortably. 

Pro tip: To pay off your loan faster and save on interest, opt for fortnightly repayments! With 26 fortnights in a year, making fortnightly payments means you’ll be making the equivalent of 13 monthly repayments rather than 12.


Is a KiwiSaver first home withdrawal right for you?

If you’ve been contributing to KiwiSaver for at least three years, you might be eligible for a first-home withdrawal. While accessing KiwiSaver funds can fast-track homeownership, you should assess your financial goals before dipping in. 

Withdrawing funds from your KiwiSaver account will reduce your retirement savings, but on the other hand, home ownership contributes to financial security in retirement. When weighing up whether or not to withdraw your KiwiSaver funds for a first home deposit, try not to view it as a choice between homeownership and a comfortable retirement. Instead, consider whether you’d prefer investing in property or a managed fund to help you meet your financial goals. 

At Blue Canoe, we can help you fully understand both options. Our team can help you get the most from your retirement savings and determine if making a KiwiSaver first-home withdrawal aligns with your overall financial plan. If you do choose to use KiwiSaver, consider switching to a conservative fund to ensure market shifts don’t deplete your deposit in the lead up to purchasing your first home.

Pro tip: Depending solely on KiwiSaver for your deposit can leave you short if the home costs more than expected. To avoid disappointment, calculate your home deposit without relying on KiwiSaver.


Think long term

It’s easy to get caught up in the here and now when house hunting, but think ahead: where do you want to be in the long run and will you get that money back when it’s time to move on in a few years? 

For example, if you have a long-term goal of owning multiple investment properties, look for a first home in a good spot that’s easy to maintain and meets healthy home regulations. Or if you’re into renovating homes to sell later, a doer-upper with potential for decent resale value might be for you. Research the market to see if your property type and location are likely to hold their value. And check out tools like the House Price Index to track trends.

Defining your financial goals early on can make the home buying process a lot smoother and help you pick something that fits where you’re headed. At Blue Canoe, we can help you create a comprehensive financial plan and guide you on how to save and invest for your first home purchase. 

Reach out today to book a free discovery session with one of our financial advisers.

Find us at Level 14, 22 Willeston Street, Wellington, 6011
Contact Hans: 027 230 1045
Contact Isaac: 027 339 0879
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