The deposit
Many people think the first step towards buying a home is finding a property, but that is not the case. Before viewing homes, buyers really need to set a budget. It is best to contact a bank or mortgage adviser early to work out how much you can borrow and what the repayments would be, based on your circumstances. This gives you a realistic understanding of your price range and helps you assess your ability to make repayments.
Saving a deposit can be one of the biggest financial hurdles. When buying property in New Zealand, buyers usually need a deposit of at least 20%. First-home buyers can make a KiwiSaver withdrawal after contributing for at least three years, and those who qualify may be able to buy with a deposit of just 5%.
When preparing your deposit, consider your current savings and available sources of funds, including bank loans, family support or personal investments. To help the lending approval process run smoothly, seek pre-approval early, have a bank or lender assess your borrowing capacity, and understand the repayment terms and how interest rate changes could affect your finances.
Additional home-buying costs
Beyond the purchase price, there is a range of potential additional costs to consider:
Legal fees
In New Zealand, property transactions require the assistance of a lawyer or qualified legal executive, so you must set money aside for this expense. Legal fees usually cover contract reviews, title searches and the transfer of funds, and generally range from NZ$1,000 to NZ$3,000.
Building inspection fees
To check a home's structural safety and quality, many buyers commission a building inspector to carry out a comprehensive inspection, typically costing around NZ$400 to NZ$800.
LIM report
A LIM (Land Information Memorandum) contains council records relating to the property, including information about foundations, flood risk and nearby development. It can be requested from the council for a fee, generally ranging from NZ$250 to NZ$400. Many properties are marketed with a LIM report, so buyers do not need to request one, but there are still key points to check: whether the report is up to date and whether it shows signs of tampering. For peace of mind, many buyers still obtain their own report from the council.
Other common reports
Banks sometimes require buyers to provide certain information and will only approve a loan once they have confirmed the property meets their criteria. For example, a property valuation costs NZ$1,000, while a weathertightness inspection report costs approximately NZ$500 to NZ$600. Some buyers also arrange drug testing and other relevant checks themselves.
Moving costs
Buyers also need to allow for moving services and the cost of reconnecting utilities such as water, electricity and internet after moving. Generally, a short-distance move may cost several hundred New Zealand dollars, while a long-distance move could cost several thousand New Zealand dollars。
Bridging finance costs
If you buy a new home before selling your existing one, you may need a bridging loan to help pay for it. If your old home does not sell on time, or sells for less than expected, this could have a significant impact on your finances.
Mortgage interest and repayment plans
When deciding how much to borrow and setting a repayment plan, buyers need to compare interest rates across banks and choose a suitable option, whether fixed or floating. When rates are low, a fixed rate may be a safer choice, while a floating rate can offer more flexibility during periods of greater market uncertainty. Either way, regular repayments will be a long-term financial commitment. Calculate the proportions of interest and principal in your repayments in advance, and keep some money in reserve for unexpected financial circumstances.
You also need to factor in insurance costs, as property insurance is an expense that cannot be overlooked after buying a home. Basic cover includes house and contents insurance to protect against accidental losses from fire, natural disasters and other events. Some banks may also require buyers to take out mortgage insurance to reduce lending risk. House insurance premiums vary according to factors such as the property's value and location, usually ranging from several hundred to over a thousand New Zealand dollars a year.
Depending on the property, you may also face varying amounts in routine maintenance and property management fees. After buying, monthly mortgage repayments are not your only expense: there are also routine maintenance costs. Older homes generally cost more to maintain, with roof repairs, drainage system maintenance and exterior painting all potentially adding to your outgoings.
Apartment buyers also need to pay regular property management fees of around NZ$3,000 to NZ$10,000 a year. These fees usually cover maintenance of communal areas, lift repairs and similar costs.
Buying property in New Zealand involves much more than a deposit and monthly repayments; it is a complex, long-term investment. Prospective buyers need to consider all the expenses and financial implications before and after purchasing. If you need help, speak with Barfoot & Thompson's experienced industry professionals to ensure you make informed decisions throughout the home-buying process.