First Home Buyers: What Are Your Options? (With Real Case Study)

Understanding Your Options as a First-Home Buyer

Buying your first home is a significant financial decision, and it’s essential to understand the various options available to you. The right choice will depend on your deposit, income, lifestyle, and future aspirations.

Main Options for First-Home Buyers

• Low Deposit Options (5% – 10%)
  If you don’t have a full 20% deposit, you might still enter the market with:
  • 5% deposit: Available through Kāinga Ora / First Home Loan schemes.
  • 10% deposit: Standard lending with certain conditions.

  Be aware of stricter lending criteria and fewer lender options, along with a more detailed assessment of your income and spending.

• 20%+ Deposit (Stronger Position)
  A deposit of 20% or more puts you in a stronger position, providing:
  • Wider choice of lenders
  • More competitive interest rates
  • Greater flexibility in structuring your loan
• Using KiwiSaver as Your Deposit
  KiwiSaver can be a crucial part of your first-home purchase. You may be able to:
  • Withdraw most of your balance (keeping $1,000)
  • Use it as part or all of your deposit
• Buying Your First Home
  The primary goal for most first-home buyers is to own a home rather than pay rent. This allows you to:
  • Build equity over time
  • Gain stability
  • Have more control over your living situation

Thinking Ahead

While ownership is the primary focus, consider your long-term goals. This could involve:

• Choosing a property that allows for future flexibility
• Keeping options open for improvements or additional income
• Buying in an area with long-term potential

Real Client Scenario

Let’s look at a simplified example of a client in Whangārei:

• Situation: A first-home buyer using 100% KiwiSaver as her deposit with a moderate income and flexibility on location.
• Goal: To buy her first home and stop renting.

We took a step-by-step approach, recognising that:

• She might not be ready to purchase multiple properties immediately.
• Building cash flow and a deposit would take time.

She decided to purchase a home that fits her current lifestyle and has sufficient land size for future flexibility.

Looking Ahead

After settling in, her plan is to stabilise her financial position and explore the option of adding a second dwelling in the next 1-2 years, depending on feasibility and council approval. This strategy allows her to gradually increase equity and potentially improve cash flow over time.

Key Takeaway

You don’t have to do everything at once. A well-thought-out first purchase can help you enter the market, build a strong foundation, and maintain flexibility for the future.

Common Mistakes to Avoid

• Focusing solely on loan approval
• Not understanding deposit options
• Choosing a loan without considering long-term implications
• Feeling pressured to overcommit
• Not seeking advice early

Why Consult a Mortgage Adviser Early?

A mortgage adviser can assist you in:

• Understanding your borrowing position
• Comparing different deposit options
• Structuring your loan effectively
• Keeping future options open

It’s not just about buying your first home; it’s about starting your journey on the right foot.

Which Stage Are You Currently At?

If you’re a first-home buyer, the decisions you make now will influence your financial future. Consider whether you are simply buying a home or also setting up for your next steps.

Disclaimer

The information provided in this article is general in nature and does not take into account your personal situation, objectives, or needs. It should not be considered as personalised financial or investment advice. Before making any decisions, it is recommended that you seek independent professional advice relevant to your circumstances.