Thinking about buying your first home? There are often a number of confusing things to consider when buying your first home, the legal jargon alone can be enough to put someone off.
We have put together an introduction guide with some helpful tips and steps to get you started and help you along the way to buying your first home.
1. Contact your mortgage broker or bank
Most first home buyers require bank lending to fund their purchase. If this is the case for you, you should contact your mortgage broker or bank prior to entering into a Sale & Purchase Agreement (Agreement) to obtain pre-approval and understand what budget you are working with.
If you are obtaining lending, there is often confusion around the bank requiring you to have a 20% deposit, yet the Agreement only requires a 10% deposit to be paid. This 20% deposit required by the bank means you must be able to contribute 20% of your own funds (including Kiwisaver or any gift) towards the purchase before the bank will lend you money. You may pay 10% as the deposit under the Agreement and the remaining 10% you are able to contribute will be paid on the date you pay the balance of the purchase price, become the registered owner and take possession of the property (the settlement date).
2. Contact your solicitor
Get in touch with your solicitor as early as possible and let them know you are interested in purchasing a property.
All law firms need to complete Anti-Money Laundering (AML) compliance on clients before they can act on a purchase. Getting this ticked off ahead of time will ensure that there are no delays when you eventually find a property that is the right fit for you. The documents required may vary depending on whether you are purchasing as individuals, or through a company or family trust. Real estate agents and banks are also required to comply with AML compliance.
Once you have found a property you are interested in purchasing, you may receive an Agreement from the real estate agent. Have your solicitor review the Agreement before signing it. Once the seller accepts and signs the agreement, it is binding on both parties. We often find buyers can enter into agreements without advice from their solicitor and this is where things can get a bit messy if there are unfavourable terms in the Agreement that you may not have been aware of.
Most first home buyers aren’t in a position to make an unconditional offer on a property. Your solicitor will talk you through what you should consider including in the Agreement, whether any of the existing terms or conditions already contained in the Agreement should be removed or amended, advise you on any risks you should be aware of, and help you better understand what you are getting into.
3. Insurance
Depending on the property you are looking at, you may want to check that you can arrange dwelling and contents insurance cover. If you are obtaining lending from the bank, the bank will require you to insure the property from the settlement date. A copy of the insurance policy gets provided to the bank before the bank will pay out the loan advance for your purchase.
4. First Home KiwiSaver Withdrawal Application / First Home Grant Application
If you are buying your first home or land to build a home that you plan to live in, you may be eligible to withdraw your KiwiSaver funds to use towards the purchase. You must have been a member and have been contributing to your KiwiSaver for at least 3 years. You can apply for pre-approval online from your KiwiSaver provider.
You may also be eligible for a First Home Grant if you have been contributing to your KiwiSaver for at least 3 years. Eligibility for the First Home grant is dependent on your income and type of property you are looking at buying. You can also apply for pre-approval online.
5. Deposit funds ready
Once you have a signed Agreement, whether conditional or unconditional, you will be required to pay a deposit, which is often 10% of the purchase price. The deposit is usually payable upon entering into the Agreement or once all the conditions have been confirmed. You will need to ensure you have the deposit funds at hand. If you plan to use your Kiwisaver funds towards paying the deposit, you should let your solicitor know in advance so they can ensure you have enough time to withdraw your KiwiSaver funds to pay the deposit.
The above is just a brief summary of steps to consider before purchasing a property. This is not a comprehensive list of things to be considered. We recommend you discuss your purchase with your solicitor as the considerations for each property will differ. For example, if you are purchasing a unit this may come with Body Corporate considerations, and if purchasing “off the plans” (a section/bare land) there will be other matters to consider.
If you are thinking about purchasing a property and want expert advice, get in touch with our Property Law Team at TODD & WALKER Law on [email protected] or +64 (03) 441 2743.
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