Buying a first home

Credit Card Wake-Up Call

Rachel, 29, teacher in Auckland, $72K income

1. Expected to borrow: $450,000
2. Bank approved: $280,000
3. Shocked by huge difference!

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The Car Loan Trap

Tom & Sarah, combined $130K income, wanted $600K loan

1. Car loan: $650/month
2. Borrowing reduction: $650 × 30 × 12 = $234,000
3. Car was costing them $234K in borrowing power!

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Self-Employed Reality Check

Jason, 38, tradesman contractor

1. Gross business revenue: $165,000/year
2. After expenses net profit:
3. Year 1: $68,000
4. Year 2: $74,000
5. Average: $71,000 (bank assessment)

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The Perfect Storm Success

Mark & Jenny, both 34, combined $145K income

1. Clean bank statements (no gambling, minimal takeaways)
2. Strong savings pattern shown
3. Zero unnecessary debts
4. Both stable employment 2+ years

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Aroha and Mia: two friends, unequal deposit

Aroha and Mia buy a $760,000 townhouse together. Aroha contributes a $120,000 deposit and Mia contributes $40,000, so the combined deposit is $160,000 and the loan is $600,000. They agree to split the mortgage repayments equally and hold the title as tenants in common, with shares that reflect what each of them puts in.

1. Loan split equally: $600,000 / 2 = $300,000 each
2. Aroha's total contribution: $120,000 deposit + $300,000 loan = $420,000
3. Mia's total contribution: $40,000 deposit + $300,000 loan = $340,000
4. Aroha's share: $420,000 / $760,000 = 55.3%

Mia's share: $340,000 / $760,000 = 44.7%

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Tama and Rewi: survivorship changes who inherits

Brothers Tama and Rewi buy a $800,000 home together, contributing equally. Tama has a will leaving everything he owns to his daughter. Some years later Tama dies. What happens to the home depends entirely on how they held the title.

1. The right of survivorship applies, so Tama's interest passes automatically to Rewi
2. Rewi becomes the sole owner of the whole $800,000 home

Tama's daughter receives nothing from the home, whatever his will says

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Sam wants out: using the first right of refusal

Sam, Priya and Jack bought a home together as tenants in common in equal thirds. It is now worth $900,000 with a $450,000 mortgage, so the equity is $450,000. Sam is moving overseas and wants to sell his share. Their co-ownership agreement gives the others a first right of refusal at a valuer-assessed price.

1. Equity: $900,000 value − $450,000 mortgage = $450,000
2. Sam's share: $450,000 / 3 = $150,000

Priya and Jack can buy Sam's third for $150,000

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A parent's $100,000: gift versus documented loan

A parent puts $100,000 toward their daughter's first home. The daughter adds $20,000 of her own savings and borrows $480,000 to buy a $600,000 home. A few years later she has been in a de facto relationship for over three years, and the couple separate. Assume the equity at separation is $150,000. The result depends on whether the $100,000 was gifted or lent.

1. The home is the couple's family home, so the $150,000 equity is relationship property
2. Relationship property is generally split 50/50: $150,000 / 2 = $75,000 each

About $50,000 of the parent's $100,000 effectively ends up with the ex-partner

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Mereana: checking the maintenance fund balance

Mereana is looking at a unit in a 30-unit building. The long-term maintenance plan in the disclosure forecasts $900,000 of works over the next 10 years. The long-term maintenance fund currently holds $120,000, and the building collects $60,000 a year in long-term maintenance levies.

1. Fund in 10 years at the current rate: $120,000 + (10 × $60,000) = $720,000
2. Forecast cost of works: $900,000
3. Projected shortfall: $900,000 - $720,000 = $180,000

Likely special levy per unit (even 30-way split): $180,000 ÷ 30 = $6,000

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Daniel: a special levy hiding in the minutes

Daniel reads the three years of general meeting minutes in the pre-contract disclosure. A resolution passed last year approves re-cladding the building at an illustrative $2,400,000, funded by a special levy. The unit he wants has an ownership interest of 3.5%.

1. Total special levy: $2,400,000
2. His unit's ownership interest: 3.5%
3. His share: $2,400,000 × 3.5% = $84,000

A levy already approved that he would inherit on settlement

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Sione: comparing two apartments' annual levies

Sione is deciding between two similar apartments. Apartment A charges $6,500 a year in levies. Apartment B charges $3,800. B looks like the bargain, so he checks how each levy is split.

1. Apartment A: $4,500 operating + $2,000 to the maintenance fund = $6,500
2. Apartment B: $3,500 operating + $300 to the maintenance fund = $3,800
3. Maintenance saved over 10 years in A: 10 × $2,000 = $20,000
4. Maintenance saved over 10 years in B: 10 × $300 = $3,000

B under-provisions by about $20,000 - $3,000 = $17,000 per unit over the decade

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Ana: disclosure-statement red flags

Ana works through the pre-contract disclosure for a 40-unit building and finds four warning signs at once.

1. Only one year of financial statements is provided, not the required three years
2. The minutes reference a weathertightness claim on the building
3. The body corporate discloses actual knowledge of an earthquake-prone rating
4. Several owners are in levy arrears, straining the funds

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Priya and Sam - 10% deposit on a $700,000 apartment

Priya and Sam sign to buy a new apartment off the plans for $700,000. The developer asks for a 10% deposit, held in the developer's lawyer's trust account until settlement.

1. Purchase price: $700,000
2. Deposit at 10%: $700,000 × 0.10 = $70,000
3. Held in trust until settlement, refundable on valid cancellation
4. Balance due at settlement: $700,000 - $70,000 = $630,000

They tie up $70,000 now, and must fund $630,000 (deposit plus loan plus savings) at settlement

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Priya and Sam - a valuation shortfall at settlement

Eighteen months later the apartment is finished. Priya and Sam had planned on an 80% loan. When they signed, an 80% loan on $700,000 would have been $560,000, leaving $140,000 of their own money to find, of which the $70,000 deposit was already paid. But the market has softened, and the bank's registered valuation comes in at $650,000. The bank lends 80% of the lower of price or valuation.

1. Contract price (still owed in full): $700,000
2. Planned loan at signing: $700,000 × 0.80 = $560,000
3. Valuation at completion: $650,000
4. Actual loan: $650,000 × 0.80 = $520,000
5. Own funds now needed: $700,000 - $520,000 = $180,000
6. Deposit already paid: $70,000

Extra cash to find at settlement: $180,000 - $70,000 = $110,000

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Tane - a sunset-clause cancellation

In 2024 Tane signs to buy a new townhouse off the plans for $650,000, paying a 10% deposit of $65,000 into trust. The contract has a sunset date 24 months out. The build runs late and the sunset date passes. The contract lets the developer cancel under the sunset clause.

1. Contract price: $650,000
2. Deposit paid into trust: $650,000 × 0.10 = $65,000
3. Developer cancels after the sunset date. No NZ law requires Tane's consent.
4. Deposit returned in full: $65,000
5. Equivalent new townhouses now sell for: $720,000

To buy again, Tane faces $720,000 - $650,000 = $70,000 more, plus a fresh deposit and lost time

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Mere - the new-build deposit advantage

Mere is buying an $800,000 owner-occupier home. For an existing home her bank would want a 20% deposit. Because a new build is exempt from the LVR restrictions, the bank is willing to lend up to 90% on the new build.

1. Purchase price: $800,000
2. Existing-home deposit at 20%: $800,000 × 0.20 = $160,000
3. New-build deposit at 10%: $800,000 × 0.10 = $80,000
4. New-build loan at 90%: $800,000 × 0.90 = $720,000

Upfront deposit saving on the new build: $160,000 - $80,000 = $80,000

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Auckland Dream Becomes Nightmare

Michelle, 35, bought Auckland apartment, ignored DSR

1. Gross rent: $31,200
2. Body corp: $5,200/year
3. Rates/insurance: $4,200/year
4. PM & maintenance: $4,100/year
5. NOI: $17,700
6. Debt service (6.5%): $43,507
7. DSR: 0.41

Top-up needed: $25,807/year ($496/week!)

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Regional Success Story

James, 42, bought Palmerston North with DSR focus

1. Gross rent: $30,160
2. Operating expenses: $9,800
3. NOI: $20,360
4. Debt service: $18,586
5. DSR: 1.10

Positive cashflow: $1,774/year

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Interest Rate Reality Check

Sarah & Mike, bought when rates were low, got caught

1. $650K property, $520K loan (80%)
2. Rent: $600/week
3. NOI: $19,500
4. Debt service at 2.5%: $24,715
5. DSR: 0.79 (negative, but manageable)
6. Top-up: $5,215/year ($100/week)

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Portfolio Builder Strategy

David, 48, built 5-property portfolio using DSR discipline

This one turns on the rules rather than on a calculation, so there are no sums to show.

First-Time Home Buyer (Good DTI)

Emma is 28 and wants to buy her first home.

1. Annual salary: $65,000
2. Gross monthly income: $5,417
3. Current Debts:
4. Student loan: $280/month
5. Car payment: $350/month
6. Credit card minimum: $50/month
7. Total current debt: $680/month

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High Earner with High Debt (Borderline)

James earns a high salary but has significant existing debt.

1. Annual salary: $120,000
2. Annual bonus (average): $15,000
3. Gross monthly income: $11,250
4. Current Debts:
5. Student loans: $650/month
6. Car lease (luxury): $800/month
7. Personal loan: $400/month
8. Credit cards: $250/month
9. Total current debt: $2,100/month

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Couple Buying Together

Mike and Sarah are married and buying their first home together.

1. Mike's salary: $55,000/year ($4,583/month)
2. Sarah's salary: $48,000/year ($4,000/month)
3. Combined gross income: $8,583/month
4. Current Debts:
5. Mike's car: $380/month
6. Sarah's student loan: $220/month
7. Joint credit card: $100/month
8. Total current debt: $700/month

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How to Improve High DTI

Lisa has a DTI of 44% and needs to get it under 36% to qualify.

1. Gross monthly income: $5,000
2. Total monthly debts: $2,200
3. Current DTI: 44%
4. Target DTI: 36% or less

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Priya: a 30% NBS rating on the apartment she wants

Priya is buying a unit in an eight-unit 1975 concrete block listed at $480,000. The disclosure documents reveal a seismic rating of 30% NBS. Because 30% is below 34%, the building is legally earthquake-prone, carries an EPB notice and is on the register.

1. Illustrative cost to strengthen the block from 30% to 67% NBS: $1,200,000
2. Priya's share for an even eight-unit split: 100% ÷ 8 = 12.5%
3. Her likely special levy: $1,200,000 × 12.5% = $150,000

Effective cost of the apartment: $480,000 + $150,000 = $630,000

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The Wai Street body corporate: a strengthening special levy

A 20-unit unreinforced masonry building rated at 25% NBS must be strengthened to 70% NBS. The body corporate approves the work at an illustrative $3,000,000 and applies the long-term maintenance fund toward it.

1. Total strengthening cost: $3,000,000
2. Long-term maintenance fund applied: $400,000
3. Amount to raise by special levy: $3,000,000 - $400,000 = $2,600,000
4. Owner A, a larger unit at 6% entitlement: $2,600,000 × 6% = $156,000

Owner B, a smaller unit at 4% entitlement: $2,600,000 × 4% = $104,000

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Tom: the insurance and finance impact

Tom has an offer accepted on a unit in a 28% NBS building at $420,000 with a 20% deposit. He needs a $336,000 mortgage. Then the insurance and finance checks begin.

1. Illustrative premium for a comparable sound building: $2,500 per year
2. Insurer's loading for the earthquake-prone rating: about 60%
3. Loaded premium, if offered at all: $2,500 × 1.6 = $4,000 per year

Extra insurance cost: $4,000 - $2,500 = $1,500 per year, possibly with earthquake cover excluded

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Aroha: earthquake-prone at 30% NBS versus 70% NBS

Aroha is choosing between two similar-looking apartments. Building X is rated 30% NBS and priced at $450,000. Building Y is rated 70% NBS and priced at $520,000. The 70% figure worries her because it is not 100%.

1. Below the 34% line, so on the EPB register with a notice and a deadline
2. Illustrative strengthening share for her unit: $150,000
3. Insurance and finance likely to be difficult

Effective cost: $450,000 + $150,000 = $600,000, plus finance risk

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Young Couple - Auckland Apartment

Alex & Jordan, both 28, combined income $140,000

1. Target: 2-bed apartment, $650,000
2. Saved: $55,000 cash
3. KiwiSaver: $35,000 (Alex), $32,000 (Jordan)
4. Both in KiwiSaver 5+ years

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Single Buyer - Wellington Townhouse

Priya, 32, income $95,000

1. Single income = lower borrowing capacity
2. Bank approved: $500,000 loan max
3. With 20% deposit: $625,000 max purchase

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Stretched Budget - Learned Hard Way

Mike & Sarah, maxed out borrowing capacity

1. Combined income: $120,000
2. Bank approved: $650,000 loan
3. Purchased: $800,000 home (max budget)
4. Monthly mortgage: $4,108
5. Left no buffer for costs

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Smart Strategy - Christchurch

Tom & Lisa, patient and strategic

1. Saved for 4 years
2. Target: $550,000 purchase
3. Saved: $130,000 (23% deposit!)
4. Well above 20% requirement

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A CBD apartment facing a ground-rent review

Ben is looking at a leasehold apartment priced at $400,000. The ground rent is currently $18,000 a year, set at 5% of the apartment's share of the land value, and reviewed every 7 years. The next review is due soon, and the land has risen so that his share is now assessed at about $500,000.

1. Current ground rent: $18,000 a year
2. New rent at review: 5% x $500,000 = $25,000 a year
3. Increase: $25,000 − $18,000 = $7,000 a year, about $583 a month more

Ground rent alone rises to $25,000 a year, before mortgage, rates or body corporate levies

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Freehold versus leasehold: the saving that disappears

Priya compares two similar apartments. The freehold one is $650,000. The leasehold one is $400,000, so the price gap is $250,000, which looks like a big saving. The leasehold apartment has ground rent of $20,000 a year.

1. Upfront price gap: $650,000 − $400,000 = $250,000
2. Ground rent: $20,000 a year
3. Years to spend the saving in rent: $250,000 / $20,000 = 12.5 years

After about 12.5 years the ground rent alone has consumed the entire upfront saving, and Priya still owns no land

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A 21-year review: a documented sharp jump

Some Auckland leasehold homes sit on land where the ground rent resets to a percentage of the current land value only once every 21 years. On Cornwall Park land, one home's ground rent was documented rising from about $8,300 a year to about $73,750 a year at a scheduled 21-year review. This example uses those figures to show the scale.

1. Old ground rent: about $8,300 a year
2. New ground rent at review: about $73,750 a year
3. Increase: $73,750 − $8,300 = $65,450 a year, about $5,454 a month more

That is roughly 8.9 times the old rent, in a single step

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A short lease: hard to finance, hard to resell

Marama wants to buy a leasehold townhouse for $350,000. It is on a fixed-term lease with only 8 years left to run. Her bank is willing to lend $300,000, but only if the loan is repaid within the remaining lease, so over 8 years rather than a normal 25. Assume an illustrative 6.5% interest rate.

1. $300,000 over 25 years at 6.5%: about $2,026 a month
2. $300,000 over 8 years at 6.5%: about $4,016 a month

Squeezing the loan into 8 years nearly doubles the monthly repayment

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The 90% LVR Trap

James, 28, impatient first home buyer

1. Rate: 7.15% (6.40% + 0.75% LEP)
2. Monthly: $2,924
3. LEP cost: $270/month, $3,240/year

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Strategic 25% Deposit

Emma, 32, patient approach

1. Property: $420,000 (bought under budget)
2. Deposit: $105,000 (25%)
3. Loan: $315,000
4. LVR: 75%

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New Build 5% Deposit Success

Mike & Lisa, used new build exemption

1. New build price: $720,000
2. 5% deposit allowed: $36,000
3. Loan: $684,000 (95% LVR)
4. Used $36K, kept $44K for costs/furniture

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Investor 40% Deposit Strategy

David, 45, experienced investor

1. Property: $550,000
2. Deposit: $220,000 (40%)
3. Loan: $330,000
4. LVR: 60%

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Aroha and Sam: $700k new build vs $750k existing

Aroha and Sam are choosing between a $700,000 new build and a $750,000 established home. To compare running costs fairly, assume both buy with a 20% deposit and a 6.0% illustrative interest rate.

1. New build deposit: $700,000 × 20% = $140,000, so the loan is $560,000
2. Existing home deposit: $750,000 × 20% = $150,000, so the loan is $600,000

The existing home needs $10,000 more deposit

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Priya: a small deposit and the new-build exemption

Priya has saved $80,000 and is looking at a $600,000 property. She wants to know whether buying new makes her deposit stretch further.

1. A 20% deposit would be $600,000 × 20% = $120,000
2. Priya's deposit: $80,000 ÷ $600,000 = 13.3%

She needs the bank to lend above 80%, which it can only do for up to 25% of its new owner-occupier lending, so approval is not guaranteed

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The Nguyen family: turnkey vs build contract

The Nguyens can buy a $750,000 turnkey home, or buy a $350,000 section and build a $400,000 house under a build contract, for the same $750,000 end value. Assume a 6.0% illustrative rate and a 9-month build.

1. Deposit on signing: $750,000 × 10% = $75,000
2. Balance on completion: $675,000

No construction-period interest, they keep renting until handover

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Tama: the bright-line test applies to both

Tama has heard that new builds have a shorter bright-line period, and is weighing a new build against an existing home he might sell within a few years.

1. For property sold on or after 1 July 2024, the bright-line test is 2 years for both new builds and existing homes
2. If the property is his main home, the bright-line test generally does not apply at all

The old 5-year (new build) versus 10-year (existing) split no longer exists

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