Ten ways to make this the year to buy that house

If you felt like you drifted through the 2010s, then the start of a new year and the start of a new decade is a good time to set goals. And what could be a bigger goal than buying your house – or upgrading to the next property ?

Here are ten ways to make this your year of the house:

1. Break out a budget

Sorted.org.nz, the Commission for Financial Capability’s service that helps New Zealanders get ahead financially, has plenty of great tips and tools for making a budget work for you.

Surveys have shown that nearly half of all Kiwis sometimes spend more than they earn, so a budget helps you make sure that you’re actually spending less than you’re earning.

There are plenty of apps you can buy, or pen and paper sheets you can download to get started, but to start with use sorted.org.nz’s handy goal setting and budgeting on-line tools to see where your money is going.

More sophisticated tools help you do future projections, figure out cash flow, and more, but start by tracking a basic record of day to day spending, annual costs and regular debt repayments.

It needn’t be grim. Learn here how to budget without depriving yourself.

2. Clean up the finances

Sorted suggests that lenders calculate that fixed loan, hire purchase and other debt re-payments should be no more than 30 to 40 percent of your gross income, so if hire purchase or credit card debt is chewing up income, start there first.

Some bank cards entice new customers by offering zero interest for 12 months if you transfer to their card, an enticing way to clear the balance - but only if are disciplined enough to stay within the credit limit, and focus on getting the balance to zero within that time, otherwise you’ll be back up to paying double digit interest.

Do the math on other debt consolidation products, as some have fees which may negate the savings.

If you have several lots of debts, Frances Cook suggests motivating yourself by whacking away at one completely, rather than trying to nibble away at all of them.

3. Simplify the spend

Once you’ve done the budget, don’t get waylaid by trivial spend that fritter away the dollars.

Right now, there are plenty of stories of how to lock the wallet: some people like to put away the credit card so you can’t impulse spend; others limit themselves to a weekly cash allowance rather than losing track of loads of minor eftpos transactions that quickly add up.

To keep your spending in check, force savings by transferring to savings accounts at the beginning of your pay cycle, rather than hoping you’ll have surplus to save at end of the pay period.

The eco-zeitgeist is on your side right now with plenty of advice on how not to buy into the consumer culture, but to borrow or swap, re-use and re-cycle and buy second hand goods.

4. Build up the Kiwisaver contribution

If you’re not enrolled in a Kiwisaver scheme, do so immediately, as it is the easiest way to make saving. The KiwiSaver HomeStart grant – up to $5000 for an existing home or $10,000 towards a new home or land - and the home purchase withdrawal will contribute to buying your first home.

Whether you contribute 3 percent, or more, you’ll get at least 3 percent contribution from your employer added to that, as well as the annual government contribution of $521. If you’re already enrolled, up your contributions to the maximum 8 or 10 percent of your gross salary, before tax.

5. Educate yourself

While you’re building up your savings, make the most of free property seminars from banks or mortgage brokers, or local budgeting and other services to understand the property market. There is plenty of information on-line and organisations like First Home Buyers Club to help you.

Do protect yourself from workshops that are obviously marketing investment properties or pressuring you to sign up to expensive programmes.

6. Decide your home priorities

Long before you hit the streets looking at property, you need to narrow down just what sort of home is your ideal. If you’re buying with a partner, don’t just assume you’re on the same page.

Despite what you seen on the hundreds of house search reality shows, this is about more than taste in wallpaper or kitchens. Unless money is no object, there will be tradeoffs.

Is a lot of space more important than a short commute? Are amenities like garages, sheds or big gardens essential? Do you want a place that could have potential income from flat mates or tenants? Do you want something for your life as it is now or for a future family/lifestyle?

Some advisors say that maybe waiting for a forever home is a better buying strategy than expecting to work your way up the ladder every three to five years. Think about whether you'd be better to build your own home, rather than buy an existing one too.

7. Start checking out new neighbourhoods

With clarity on your priorities, and without the pressure of actual house hunting, spend your free time getting to know neighbourhoods you may not have considered before. While it’s easy to find stats and background on-line, there’s nothing like wandering actual streets to check out houses, shopping areas and services, schools, parks and playgrounds. Try public transport links to help get a sense of what your commute might be.

8. Get your team together

Buying a house needs expert help. Before you’re under buying pressure, ask around from people who’ve recently bought for recommendations for mortgage broker, conveyancing solicitor, building inspector, even insurance companies.

You’ll also need to understand Council paperwork, so go on-line to see how property reports and LIMs work in your territory.

9. Consider buying partners

If the numbers aren’t stacking up to buy a place on your own, consider buying with friends or family. This requires legal documentation to cover all possible future scenarios (for example, when or how you can sell the property), but also that you can be completely open to your buying partners about your financial situation (and expect the same from them).

10. Plan to pay off mortgage faster

Yes, even before you’ve bought, set yourself targets to pay off the mortgage faster. Use online calculators to see how paying an extra $20 a week could knock years off your mortgage, and substantially reduce your interest payments or test yourself with savings that match or exceed what your potential costs of home ownership might be.

Forcing yourself to pay more than the bank requires is also a good preparation for when interest rates go up over the course of your mortgage.