Last month we talked about the five steps to getting your first home, after step two – getting pre-approval on hand, most of clients will move towards the house hunting stage. Here we summary five big hidden costs on top of the house purchase price. We recommend our client(s) to factor these into the budget to ensure a best possible new home ownership experience.
1. House hunting expenses
Purchasing a house could be your one of your biggest investments, it can cost even more if something goes wrong. It is very important to have a team of professionals to support you.
- Lawyer or Conveyancer
Purchasing a house is a legal transaction which requires a qualified lawyer to check all the legal paper work is in order, such as the record of the title (shows the property boundaries with your rights and restrictions if any). The cost can range from $1,200-$3,000 depending on the type of property and amount of legal work involved.
Generally, lawyers can charge an additional fee to look over auction documents, LIM reports, or if there is a new build property with more contracts for them to look over.
Check out the New Zealand Law Society’s list of Find a property lawyer | Property Law (propertylawyers.org.nz)
- Building inspection report
When you are wishing to make an offer or attending an auction towards a property, we recommend that you get a building inspection report by someone you trust. Some inspectors will offer a verbal report (a cheaper price) or a written building inspection report costs at least $500+.
It is also very useful to ask the inspector to quote how much any renovations, repairs and ongoing maintenance might require, which avoid any surprises in the future.
Check out the professional building inspectors list of The National Body of Professional Residential Building Inspectors | NZ Institute of Building Inspectors (nzibi.co.nz) .
- Council LIM Report
LIM (Land Information Memorandum) is a report prepared by the local city council which you can request the information via online or visiting the office. It provides a summary of the current property’s full information, including rates, consents work and any known land issues such as subsidence or flooding. It is important to check the LIM is up to date if you are offered one from a seller or real estate agent. Otherwise, contact the local council to find out how much they charge.
2. Mortgage repayments
Your mortgage repayments are likely to be your biggest expenses, change in interest rates, loan structures, selecting principal and interest payments vs interest only options.
Our mortgage calculator is a good starting point to help you to estimate how much your mortgage repayments will be. New Zealand Home Loan Calculator – Interest and Principal.
It is very important to factor in how interest rate changes might impact on you. Loan structure along with the best possible interest rates and offers can make a difference for clients, an experienced mortgage adviser is going to help you shop around, balance the best interest rates and loan structure to allow repayment stability yet discussing those flexibilities of how to pay off your loan faster.
3. Furnishings and fit outs
The remaining chattels of the property will be listed on the sales and purchase agreement, often major appliances such as dishwashers, fixed ovens and curtains are included in the sale of a home. Make sure that you check what will be left behind and if they will need replacing any time soon.
Think about what furniture you need. We might have the temptation to purchase all new furniture when we move into the property, however, in the long run, it might pay to wait to work out some furniture items once you’re more settled.
If you are on a budget, second hand furniture shops, Trademe, or even Op shops can be a good place to search for bargain.
4. Property Renovations/Maintenance
- Renovations – If you are intending to purchase a run-down property and take up a renovation project or extension on the pipeline, ensuring that you have taken into consideration of all potential costs, timeframe and living arrangements while doing the renovation projects.
- Painting – Exterior painting might need a regular maintenance every 5-10 years which can be a significant cost.
- Roofing – It is a good idea to inspect the property roof regularly with a prompt maintenance to ensure an expensive roofing repair cost. Depending on the material used on the roof, a roof may need to be replaced every 20 -25 years.
- Landscaping /Garden /Fencing – Well-planned landscaping can increase the quality of your living environment as well as potential increase the property value. However, it can be expensive when there is an ongoing garden such as tree trimming or fencing maintenance.
5. Ongoing committed costs
There are a few ongoing expenses you need to be aware of as a homeowner, the following is a list of costs that you will need to factor into your household budget moving forward.
- Rates – Rates are the single biggest ongoing bill for most homeowners. They vary according to the region, you can check the annual council rates cost and work out the best way to manage it, such as setting up a more regular smaller amount direct debit rather than paying in serval lump sums or just one lump sum if suits you better.
- Insurance – To protect your home (probably your biggest asset), yourself and your family from any worst-case scenarios, it is very important to ensure that you have got sufficient insurance over in place.
- Body corporate fees – For those type of properties that include body corporate fees.
We hope the above list helps new home owner(s) get themselves prepared, there will be a learning journey how to balance the mortgage repayments along with other costs, yet budgeting carefully to support the lifestyle you wish to lead. Also, our mortgage advisors can discuss with you options of how to best budget to fit into your plans/lifestyles.
As always, we are here to help. Get in touch for help with anything from working out where to look for your first home, how much you can afford based on your current situation and our friendly team are happy to answer any tricky questions you might have.
Next months Blog –
Different types of home loans and how they work
Disclaimer: We recommend that you seek personalised professional advice from your trusted adviser before taking any action as each applicant’s situation can be vary, the above content is only general commentary.
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