So you’ve reached the point in your life when it’s time to purchase a home. Congratulations! Home ownership is a big deal and great responsibility.
One of the first things to think about is how you’re going to pay for your new home. Most people don’t have the money to pay cash for a home, so most likely you’re going to have to take out a mortgage in order to buy. Luckily, New Zealand offers many options and interest rates on mortgages are currently considerably low compared to what they have been in the past.
So how much house can you afford? The amount you can borrow varies from lender to lender, but usually lenders will finance an amount that is about five times the amount of your annual gross household income. Lenders consider many factors when determining how much you qualify for, such as how much debt you current owe, how much income you generate, and your personal credit history.
After you have figured out how much you can borrow towards a home, you’ll want to figure out what sort of mortgage you should get. Many New Zealand borrowers take out ‘table mortgages’, which means that the payments do not change over the life of the loan. Usually the first ten years or so are spent paying back interest alone, and after that time you start paying towards the principle loan amount.
Another option is taking a reducing mortgage, which means that you pay the same amount towards your principle amount with every payment, making interest charges lower over time, which means that your payment amount will also decrease.
No matter which one of these you choose, you will have to decide between a fixed or variable rate. Home Loans with a variable rate means your interest rate can change whenever New Zealand’s central bank makes a change in their interest rates. If you fix your interest rate for a period between one to five years, once that period is over, you may fix it again. Another option is blending the two together; having part of your mortgage financed with a fixed rate and another with a variable rate.
Find a lender and take a deep look at your current finance and future finances as well. This will help you determine what will be best for you in the long run.
Continue to check visionmortgages.co.nz for ongoing mortgage information.