My first house – Guest article

When it comes to buying first home, I have big aspirations and dreams. I want a house with garden where I can have a cup of tea and toast sitting on outdoor sofa. A house where my future kids can play freely and get enough space for their activities. A place where I can host parties and don’t have to think twice for inviting 5 or more people to my home. Have a garden where I can plant trees and vegetables. A place where I can be comfortable, watch my family grow, unwind after a busy day at work which I would be able to call as my place of zen.

I have read many book and blogs which asks its readers to buy a simple and inexpensive first home. Buy a house where you can easily pay your mortgage and can sell it off when you want to upgrade to a new home (2^nd Home) of your dreams – all that you have dreamt off for your first home.

My question is why I can’t buy my first home as my dream home. I aspire to buy my first home as I have dreamt, but Auckland house prices won’t allow me to buy one. And like me many other people from the young generation won’t be able to afford their dream home. There is news all over the place that it is the best time for first home buyers to buy the home as prices have slashed down. But is it really the case? Or it’s just the news to elevate the Auckland housing market again and make it more expensive than ever.

How can I trust the news of house prices being reduced? Particularly when the representatives of the government, which are trying to provide affordable housing to its citizens own more houses than the average Kiwi? I always wonder about the houses available as part of kiwi build programme, does the reality of the houses built under the scheme match the Kiwi dream home? or is this a part of sophisticated scheme to nudge people towards small segment market and normalise dense living space by making you think that you don’t need a garden in the form of front yard or a back yard while making the already expensive homes more expensive. The recent news predicting rise in housing market by 2020 raises doubt of artificially/conveniently boosting economic growth especially when the business confidence is very low and GDP growth downgraded.

So, the solution….

Worry not, no matter how grim the situation seems there are ways to achieve the goal of owning a home which requires some efforts and discipline. Below we would explore some of the ways following which; we can achieve our dream of owning a home.

Start saving for your deposit

If you are looking to buy your first home, the first thing is to start saving for your deposit. You need to start saving say before year or two (depending on house prices and % of deposit). For buying a house in Auckland market you may have to start saving early depending on your income and financial position. Define a fixed budget for the week/month and on salary arrival immediately transfer some % of your income into your savings account and hide the account if there is an option to do so.

Follow this as a discipline and don’t let your unnecessary needs eat this money away. Initially it would be hard but with time you would be able to manage within fix budget. At times there would be a situation where you would overshoot your budget, don’t beat yourself up about it and try to continue on the discipline you have built and its okay to pamper yourself once in a while. Because in end this will help you in the biggest and most important financial decision of your life which would ultimately lead to the satisfaction of moving into your own home.

Experts recommend saving at least 20% of the total house price. For e.g. if you are thinking of buying a 7,00,000 house you need to save at least 1,40,000. Bigger the deposit the less you pay on interest over the long term and you get better deal on the interest rate.

Sorting out the Mortgage

Taking mortgage is the biggest financial commitment you’ll make. To get the best deal always try to keep a good credit history by regularly paying your credit card bills and instalments for any other debt. Take help from your family friends to accumulate the initial deposit and keep borrowing small to avoid strain in case if required to return it back when they have an urgency. It is good idea to be careful while choosing a mortgage for your house.

Have a look through the options available or go for free mortgage services offered and choose the one which will suit you the best. Always try to get the best deal since mortgage would become one of the longest running financial commitments you would make.

Consider pre and post purchase expenses

There are certain expenses to be considered before and after buying the house and keeping a cushion for these expenses could be a difference between being relaxed or stressed. Before buying the house there could be expenses related to getting the LIM (Land Information Memorandums) reports, building report by property inspectors/engineer, house valuation per house. So if you finalize a house and if one of the reports makes you reconsider your decision then you would have to once again go through all these expenses for the next one. After buying the house there could be expenses related to moving in, buying new furniture and appliances, rates or Body Corporation, repairs/maintenance etc. Lastly one should keep some savings as emergency fund for a rainy day and dip into it only when required. And  don’t let your money devaluate by letting it sit idle, make it grow by carefully and wisely selecting appropriate options. Make compounding your best friend.

This all may seem hard especially things related to cutting down some expenses and budgeting but when you would see your savings grow, you would be able to see yourself reaching nearer to your goal.

Aarti Jadeja