Buying your first home is challenging. There are things you need to consider and think about before and after you apply for a home loan. There is a lot to take in before you start looking at a house. In this article, we will discuss some of the challenges for first home buyers.
While the media are saying that the property market is making it easier for first home buyers, I would say that it is still not relatively easy for first home buyers.
As a mortgage adviser, I want to look at the some of the 3 biggest challenges for first home buyers. There are some major hurdles we will cover below.
What You Should Consider As A First Home Buyer
As a first home buyer, you will face some challenges. This however will vary from person to person. As a leading New Zealand adviser, we will look at the biggest challenges first home buyers face in this current economic environment and property market.
These challenges are in no particular order;
The Deposit – this is probably the biggest challenge for first home buyers. Most people believe that you need a 20% deposit for your first home; however mortgage brokers have a range of options (including bank home loans) which offer low deposit home loans.
Often a first home buyer can buy a a home with just a 10% deposit but the banks do charge you more with low equity margins so while you can but a home with a low deposit, a larger deposit is more preferable.
Some people are able to get help from family, and that makes things easier but you need to be careful with how this is set up. Plenty of families have issues when there is money involved things can get quite problematic.
Household Income – first home buyers are often younger and therefore have not reached their earning potential.
Lower incomes make borrowing more difficult but the banks place a lot of importance on stable and regular income so even some buyers on higher incomes will find getting lending for a first house quite difficult as the income may be unpredictable.
There are ways to increase house hold incomes, but you need to consider what is possible and sustainable.
Other Payments – many young people will have some debts or other regular payments that need to be paid.
Credit is easy to get for things like vehicles, furniture and even holidays and because of this many first home buyers will have some debts that need to be paid. Even though you may consider those debt repayments as being quite manageable and even interest free; however they are still debts that need to be paid.
Other payments that can limit the amount that some people can borrow is childcare or child maintenance costs and student loan repayments.
Speak to a mortgage adviser if you are saving for your first home. We can help you set up a plan early on and help you set up a budget to help you manage your household budget. Online, there are some very good online software to help with budgeting and it’s been created by Kiwi’s too. One of those online software is Pocketsmith.
So above are the biggest challenges that we see; however there are a number of others that we also see.
Challenges You Face As A Home Owner
Now that we have looked at some of the biggest challenges for first home buyers, let’s look at some new challenges you will face after becoming a home owner.
Your mortgage – the biggest debt that you now have.
The biggest financial commitment for most people to have, will be the mortgage on your home. When you buy your first home, it can seem overwhelming. You will be paying your home loan off for years and it can become a burden.
Once you have purchased your first home, you will need to ensure that you have a plan or a strategy to pay off your home loan faster. If you pay off your home loan quickly, it will save you a lot of money, but you will also have choices to help you deal with life’s changes.
So if you are looking at a mortgage reduction system, this is one which shows you how to pay off your mortgage off quickly and will help you create good habits for managing debt “eat my mortgage”.
