From Struggling First Home Buyers To Homeowners

Getting into the housing market here in NZ has been increasingly hard. We tried to buy our first home for 3 years before succeeding! So there is hope out there. Here’s how went from struggling first home buyers to owning our home.

Why are first home buyers struggling?

Saying that probably doesn’t surprise anyone based in New Zealand.

But, in case you’re not here and want context, the housing market went a bit crazy after Covid-19 hit and our borders were closed to leisure overseas travel nearly 2 years ago. According to the Real Estate Institute of New Zealand (REINZ) report, the median price of residential property has increased by 21.5%! This is between December 2020 and December 2021.

The reasons behind this are complex and while some factors are low supply (meaning that there simply isn’t enough houses for everyone who wants to buy one), low interest rates and spare money due to travel restrictions, the aim of this post definitely isn’t to dive into the issue deeper than this. I just wanted to share our experience!

In my introductory post I mentioned that we managed to buy our own home in 2021. It wasn’t easy and required some sacrifices. At the same time, we also weren’t as well prepared as we should have been.

2019: We first get in touch with a mortgage broker

In 2019 we became serious about wanting to buy a house.

We contacted a mortgage broker in mid-2019, but since I was on maternity leave at the time she said she’d touch base again once I was closer to going back to work. Fast forward to November 2019 and the mortgage broker got in touch with us again.

After talking about our numbers she referred us to her colleague who had more experience with low equity lenders like us. (Meaning we had less than 20% deposit.)

We started the paperwork process but were a bit slow to sort things out, so our statements ended up including the Christmas period. As they weren’t the most favorable statements and we were already facing higher scrutiny due to having that less than 20% deposit, the mortgage broker advised us to use January to March 2020 statements instead.

2020: Struggling first home buyers keep on struggling

For us 2020 started with watching what we spent and paying down debt. The world started to unravel with Covid-19.

Towards the end of March the lockdown was announced in New Zealand. We never heard from the mortgage broker again, even though she had told us she’d touch base again in March, and until then had been great with communication.

This didn’t matter though, my partner was contracting at the time and his income dropped to the wage subsidy provided by the government for the duration of the lockdown. We were very lucky that our landlords were understanding and gave us a small discount on our rent until he could start work again.

We shelved the house buying idea for awhile and were quite put off from using a mortgage broker again. I was so disappointed and angry she never followed through to get back to us! Made us feel we weren’t worth her time.

Soon after the lockdown my partner secured a full time job on wages which meant a more secure income.

We kept paying off debt and towards the end of 2020 were able to get rid of almost all of our consumer debt except for my partner’s car loan from FinanceNow. We then decided to approach a bank directly and got into chats with KiwiBank as we had heard good things about them from a couple of friends.

We met with our local KiwiBank mortgage advisor and set out to collect all the paperwork again. Our financially position had become better since our previous try so this time we were looking at possibly being able to borrow significantly more.

This was further increased after I closed my GEM Visa card fully.

(In New Zealand having a credit card represents potential of going into debt in lenders’ eyes, so the lower the limit, the better. Or in our case, since we didn’t truly need the card and we were low equity borrowers, it was better to close it fully. The difference in keeping a credit card with a $1000 limit and closing it was about $15,000 in borrowing power for us!!)

We had collected and sent through nearly all the paperwork KiwiBank needed except for the last payslip for my partner when the mortgage advisor rang us to say that the bank’s policy around low equity lending had gotten stricter and they were no longer doing pre-approvals for less than 20% lending.

She said we could still apply for a mortgage but in order to do that we would need an accepted offer on a property. To say we were disappointed would be an understatement.

2021: Bad luck and lucky breaks

In early 2021 we received a notice to move out of the rental we had been living in for over 4 years. Our landlords wanted to sell.

So, we got in touch with a new mortgage broker (she had helped my friend from work). She was very lovely and helpful and we got on with collecting all the paperwork. Yet again.

The fact that both my partner and myself work irregular hours was an issue though and it took us extra time to get more evenly paid weeks. Even then it wasn’t enough and our application for pre-approval was declined. The mortgage broker said that the banks would re-assess us if/when we lowered our expenses and/or increased our income.

We were so disappointed and disheartened! We were only looking at mortgage amounts with repayments less than our rent so we (and especially my partner) felt that it was unfair to say we couldn’t afford the payments. After all, we had been paying rent for over 4 years earning less than we were now.

At this stage we had had to move out of the rental and with the tight rental market AND owning a dog we had ended up living in an extension of some beautifully generous people.

But it was meant to be a short term solution and not the most ideal place with a dog, a toddler and a soon to be baby. Out of pure luck the owner of the house was friends with a mortgage advisor and put us into talks with him.

A few days before meeting with him we went to take a look at a house that was listed in the town we wanted to buy in. The asking price was so low we had a 20% deposit for it. At the meeting in the bank we discussed the house and the highest offer we could make and got a pre-approval the same day. Amazing how much easier it can be if you have a 20% deposit!

With the pre-approval finally under our belts we made an offer.

The house ended up going into deadline sale with the deadline being 4 days after we made our intial offer. We ended up raising our offer to the maximum amount we could and then we waited.

The day after the deadline we received a call saying that our offer had been accepted! Apparently we were the only first home buyers and that’s why we had been chosen.

At this stage we moved again. We had been staying longer than initally agreed and increasingly felt we were in the way.

My partner’s friend then offered that we could stay in his spare room and wait for the settlement. Our original settlement date was 19.8.2021. We rushed to get the whole legal side of things sorted only to have the lockdown announced on the 17th of August.

This majorly post-poned the settlement. Thankfully the house was empty (it was an old rental which didn’t comply with the healthy home standards) and as unconventional it was, the seller got in touch with us to offer access to the house so we could start moving our things in before the settlement.

Once the settlement went through it was a pretty surreal feeling after being struggling first home buyers for so long! Such a huge relief too, to be able to provide a home to our daughters and our dog. And to finally have some security for us as well.

Our journey to homeownership wasn’t the easiest. We encountered some bad luck on the way but I also wanted to acknowledge that we had some lucky breaks too, without them we wouldn’t be here today!

• We found a short term living solution (2 in fact) with some generous people
• House within our price range was put on the market at the right time
• We had a connection to the last mortgage advisor who helped us get a quick pre-approval
• We were able to make an unconditional offer
• The seller of the house had a kind heart and favored us over developers/investors

There was a couple of things we did have to sacrifice in order to be able to afford a house:

• Location

Originally we wanted to buy in the outskirts of New Plymouth where we were living, but as the prices kept rising we realised we were fully priced out of New Plymouth.

Pretty quickly we couldn’t afford anything closer than Stratford and started to get priced out from here as well. We are very grateful we were able to buy here after all.

A true blessing in disguise as we’re both loving the small town living, love our street and can’t see us even wanting to move back to New Plymouth. The only sad thing for me is that all my friends are back in New Plymouth and creating a local social circle has been a challenge when you’re busy with kids and studies!

• The condition of the house

Now, it may sound like exaggerating when I say that we bought one of the cheapest houses in the whole region. And while in a way that makes us lucky, it comes with its own headaches.

I can’t even begin to describe the condition of the house, even the photos won’t fully show how awful it is. We’re talking no insulation, leaks, holes and cracks in the walls, uneven floors, mismatch of materials, broken and cracked windows…

In reality there’s nothing worth saving in this house. We’re just happy it has a well functioning fireplace to keep us warm! (Our plans for the house will be it’s own post!)

And my advice for struggling first home buyers?

This was our house buying journey and we’re beyond grateful we made it. My biggest takeaway from all of this is how important 20% deposit really is. So if you can save it, I highly recommed it! While it is possible to buy with a smaller deposit it does mean extra hoops to jump through. Also, keep trying. I’m sure you will get your lucky break eventually like we did!

Are you planning on buying a house? Or already bought a house? I would love to hear what your experience was like!