Property Buying in NZ

Finally, the long months have paid. We bought our own house!

It's been a long, gruelling process for us being a first home buyer during a recesssion period. It has been a challenging year to approach different financial institutions hoping that they've somehow mellowed down on their 20% deposit requirement.

Looking back, it has been a learning curve. Now I can share a wee bit from this experience.

Banks/Mortgage Brokers. We went straight to a bank. Mortgage brokers don't really give a helping hand during times of recession. They might even make matters worse. We have tried 3 mortgage brokers and not even one has given us any sliver of hope, even damping our optimism. Because of this, we have tried going directly to banks.

We asked around from big banks to the not so big ones. It pays to really be inquisitive. As much as possible make use of friends' experiences. But use their experience only as a guide. Still go for what the banks will tell you about their services.

The banks will be upfront with what they require especially with how much deposit they want. Our main concern was our deposit since we can't meet the 20% mark, any bank asking this much is crossed out from our list. We eventually ended up with 2 NZ banks to choose from -- Kiwibank and TSB bank. Other banks require less than the 20% deposit but these two banks have already appealed to us with their low interest rates as well.

Kiwibank was a bit fuzzy with their requirements thus we ended up with TSB bank.

Deposit. This is one of the criteria that has been very critical and important with all the financial institutions. Eversince the financial market collapse in late 2008, banks have since tightened their belt and say no to anyone with less than 20% deposit and who hasn't been in their current job for the last year.

We have been saving our butts off since 2008 trying to meet this requirement. Fortunately, year 2010 saw banks/institutions mellowing down. You see, banks need more people to borrow from them so they can survive. This saving attitude hasn't gone wary. One of the requirements is that you have proved yourself saving the money for your deposit. And banks need at least 6 months' savings history.

Everyday spending. Now, all of the daily activities of your bank account has to be presented to the bank. They need at least 6 months of your spending history. There are things they're nosy about. They want to have an idea on basically the following: how well you pay your dues, how well you save money, how well you spend on non-basic things.

So, try to be clean with your dues. That's really an important factor. Any failed transactions need to be justified. Any debts owing needed explanations. This leads to my next important point.

Debts. This includes all: Hire Purchases, Credit cards, GE creditline, Q cards, Farmers cards...all types of borrowing cards.

We have paid all our hire purchases, closed off all our purchase cards and credit cards --- well, we just maintained 1 credit card since we need it sometimes. But this credit card has the lowest amount of limit one can be approved in NZ.

We found out that even if you have paid all of your purchases/debts but still have your card open/existing, banks will normally consider this as a debt and use it against you thus increasing your liability. For instance, we have $500 limit on our credit card and the account balance is $500, which means we haven't used it. The bank will assume this as a $500 liability thus your capability to be approved of X loan amount will be diminished depending on the multiplier effect of a credit card limit.

One word. Close all current debt accounts.

Honesty. Be honest with your bank mortgage officer. He/She may give you insights on the best way to go about your application.

We have been very lucky to find a good bank officer from TSB bank. Our application went on smoothly. We never had a face-to-face encounter with her. It was all done electronically. The communication has been smooth sailing. That's one of the things I admire about TSB bank unlike Kiwibank wherein you go through different people and you haven't even started with your application yet!

Certificate of Approval. When everything is acceptable by the bank, you get a Certificate of Approval. Congratulations! It states the terms of offer from the bank such as the amount of loan you got approved, the length of the loan, and any further/additional charges.

A side kwento, there was a Filipino mortgage broker who has kept our hopes so high. He even asked us to start looking for a house. We kept on asking him about the certificate of approval. But he just brushed us off saying we don't need it. Well, we found a house, made an offer and finally found out that we can't buy the house at that price! Costly lesson to learn.

Extreme aaution, wait for your certificate of approval before looking for a house. This way, you're assured of your capacity and capability of buying a house.


My next kwento will be about how we went about house-hunting. In the meantime, here's a snapshot of the house we bought. =)