Ask any mortgage broker and they will tell you that getting your first home loan can be one of your biggest financial challenges. More importantly getting the right first home loan can make a huge difference to your financial situation for many years to come.
Do Always Believe What You See On Television
In a recent television series “Our First Home” we saw three families helping their children get into their first home and while the results looked amazing to many, this was done for television and the average person without help would be very lucky to achieve anything like those results.
What they also had little focus on was the first home loan that those young couples ended up with.
Finding Your First Home
Many people and especially in Auckland are so focused and driven to find a home that fits within their budget that they lose focus on the importance of the home loan – that large financial commitment that they are prepared to enter into in order to get their first home.
Yes – it is hard to buy your first home today, but it has always been hard.
My name is Stuart Wills and when I purchased my first home in the mid-1990’s the house I purchased in Glen Eden cost me $120,000 which seems cheap in today’s market but I was single, had only managed to save a small deposit on my income of $30,200 pa.
More importantly the interest rate was 14.70% and I fixed for 3-years. I was given no advise from my bank, but fixed for 3-years as I knew I would be in trouble if the interest rates went up. Of course they went down and I was stuck with my whole mortgage at the higher interest rate! (LESSON LEARNT)
What I did was saved like crazy and had four flatmates helping me to pay the mortgage. Stupidly I sold the house a couple of years later for $150,000 and thought I was smart – what would it be worth today? Probably over $600,000! (ANOTHER LESSON LEARNT)
Often to get into our first home means we will have a large mortgage, and sometimes not the best home loan available either. With the housing market the way it is today it is sometimes more important just to get into the market and finding a better home loan is secondary.
Sadly most bank staff are not in a position to give you the advice that would be useful to you.
Getting Your First Home Loan
It is not always possible to get the best home loan when you buy your first home, but you should at least try.
Depending on your deposit, your income and the value of the house that you want to buy you may be restricted in the choices that you have.
Low deposit home loans – as mortgage brokers we see people where they may have a low deposit and therefore we might look at a Welcome Home Loan or look at one of the non-bank lenders. There are occasions where family are able to assist and we discuss the pros and cons of having a guarantor. On some occasions it is more affordable to use a 2nd mortgage rather than a larger 1st mortgage where the banks charge more.
Restricted by income – often people are at times in their lives when the income is not what banks require. This may be due to being self-employed or when someone has just started a new job, or is between jobs or contracts.
House values – the value of your potential first home is always a limiting factor. Of course we would all prefer a larger budget, but the reality is we will all be limited to a greater or lesser degree. One of the largest issues in places like Auckland is the way house prices continue to rise, and often faster than we can save. For this reason many people will over-extend themselves to get into their first home.
Getting your first home and even arranging your first home loan are not the hardest parts. The hard part is actually paying off your home loan and we all want to know the tricks to pay off our home loan faster too.
Change To A Better Home Loan
If you are one of the majority who were more focused on your first home then you quite likely ended up with a home loan that doesn’t suit you well, is not being paid off fast enough and/or you know that you should be able to do better.
A mortgage broker is in the business of finding people good home loans and for that reason you should speak with a mortgage broker to discuss your situation and see if there is a better option for you.
A mortgage broker can help you change to a better home loan.
Of course if you haven’t already found your first home loan
then a broker is ideally suited to help you with that too.