Your deposit is one of the most important aspects of the buying process as it helps to determine how much you can borrow to buy your new home. In some cases, Unity can lend you up to 95% of the property value, which means you would need a deposit of as little as 5% (eligibility criteria applies).

Your deposit could be made up of one or multiple sources of funds, for example:

• Personal savings
• Using KiwiSaver
• A gift from family

Personal savings

We know it can be difficult to put aside money each pay day, especially with increasing cost of living expenses and rising interest rates. However, regular saving will not only help you to build a sufficient deposit, it will also show a lender you are able to manage your income and have a habit of saving. This will make you more ‘lendable’.

It’s a good idea to put your savings into a high interest savings account so you can grow your money faster and be less tempted to touch it. Set a budget and stick to your goals. You’ve got this.

If saving for a deposit is proving difficult, or you’re looking for alternate ways to beef up your savings, help could be available through:

KiwiSaver

If you’ve been contributing to KiwiSaver for more than three years, you may be eligible to withdraw your KiwiSaver savings to purchase your first home. You must intend to live in the property, be a first home buyer, and purchase a property within New Zealand.

Provided you meet the eligibility criteria, you can withdraw all but $1,000 of your total KiwiSaver balance to put towards buying your first home. Check out our KiwiSaver guide for first home buyers, for more information.

Gifted Funds 

Many Kiwis turn to their family members (or the ‘bank of Mum and Dad’ as it's sometimes referred to!) to build a deposit for their first home. Not all lenders will accept a fully gifted deposit, as they generally prefer that you contribute at least 5% yourself through saving or the sale of an asset in addition to the gifted sum.

With that said, gifting is a great way to help build your deposit faster. After all, every bit helps. You’ll need your gifter to sign a declaration as evidence that these funds do not need to be paid back.

Due to the complexities involved in purchasing your first home, it’s important to have the necessary experts at your side to support you through your journey. Finding these people before you get started will help make the process a whole lot easier. Here’s who you’ll need in your support team:

• Property Lawyer (Solicitor)
• Your preferred Credit Union, Bank or Mortgage Broker
• Insurance broker
• Real estate agent (optional)

If you’re unsure where to start, have a chat with friends, family, work colleagues and neighbours to see if they have any recommendations based on their own experiences.

Having your deposit sorted is a great first step, but how does this determine how much you can afford to borrow? As a responsible lender, the amount Unity could lend you depends on a number of factors, including:

• Annual income e.g. wages or salary
• Weekly or monthly expenses e.g. utilities, insurance, school fees, groceries etc.
• Deposit amount e.g. the amount of money you have saved for a deposit
• Existing debts e.g. credit cards, loans, overdrafts etc.
• Your credit score

Typically, your loan amount will be the total price of the property minus your deposit. For example, if you are looking to buy a property worth $500,000 (inclusive of fees) and you have a 5% deposit of $25,000 (which could be made up of savings, a gift and KiwiSaver funds) the lender will need to loan you $475,000.

It’s important that your lender has a complete picture of your finances so they can ensure you can afford to repay the loan, without getting into financial difficulty. In addition to your loan repayments, you will need to pay the lender interest (the price you pay for borrowing money), pay rates, pay for house insurance, and have a buffer in case interest rates rise.

When you submit a home loan application, the lender will assess your ability to repay the loan by reviewing the factors listed above. The outcome, if your application is approved, will determine the amount you can borrow and the interest rate you will need to pay.

• WHILE YOU'RE HERE:

• To find out how much you could afford to borrow, try using a mortgage repayment calculator.

When creating your home-buying budget, it’s important to include both upfront and ongoing costs which you may not have considered as a renter.

Upfront costs

The main upfront costs when buying a home relate to:

1. Legal fees
2. A council Land Information Memorandum (LIM) report
3. Property valuations
4. Builders report

These costs can quickly run into thousands of dollars, so it’s important to factor them into the equation early on.

Ongoing costs

Once you have purchased your first home, there are ongoing costs that you will need to cover, including:

1. Property rates

Rates are a tax (based on the value of your property) and are set by your local and regional councils, who then use the money to pay for community services and facilities such as new roads, stormwater systems, libraries, water pipes, parks and reserves and so on.

All property owners are required to pay rates.

If the vendor you purchase a property from has paid their rates in advance, you will be required to reimburse them upon settlement (which is when you officially take over ownership of the property).

You can find the rates that apply to the area you’re looking to buy in by locating the local council website. All Councils are required to have properties in their areas revalued at least every three years.

2. Insurance

House insurance is a condition that must be met to obtain a home loan from your lender. It’s important your lender has assurance that the property you have purchased is protected should the unexpected occur such as a flood, fire or earthquake.

Properties located in areas deemed ‘high risk’ incur higher insurance premiums than those in low-risk areas. When discussing house insurance with your chosen insurer or broker, it’s a good idea to consider contents insurance as well.

3. Maintenance

Older homes are sometimes more affordable and may be the best option if you’re on a limited budget. However, it’s important to consider the cost of future maintenance (which is more likely with an older home). Old homes can come with aged heating systems, inefficient plumbing, or outdated wiring, which is costly to repair, maintain or replace.

A good Building Inspection Report (also known as a Builder’s Report) should help you avoid maintenance issues in the short term. However, you should have contingency funds available to draw on as needed.

• WHILE YOU'RE HERE:

• Try using a budget planner to help you work out where your money is going.

Once you’ve got your deposit sorted, it’s a good idea to visit your lender or mortgage broker and apply for a pre-approval.

Whilst a pre-approval is not a guarantee, as it comes with certain conditions (such as the need to have House Insurance), it can give you assurance that you’ll be able to borrow a certain sum of money once those conditions are met, so you can start your property search with a price range in mind.

Your pre-approval letter of offer should outline the conditions you will need to meet to be able to obtain a fully approved loan.

Once you have a pre-approved loan you can let the search for your new home begin and shop with confidence!

• WHILE YOU'RE HERE:

• Unity's Home loan Specialists can assist you in applying for a home loan pre-approval. Simply download our home loan application form to get started!