Should I buy my first house? What is the worst thing that could happen? Am I stuck for life? Will I be better off?

This week I have come across a lot of people in my classes who have a plan to purchase a home in the next five to ten years.  Great goal!  Today I am going to give you an example of a young lady who had just this plan in place.  I asked her "Why wait?  What is the worst thing that could happen?"

During the 3 hour class, we looked at her finances, we went through, as a group, with a fine toothed comb. This is how things looked for her, the reason I share this is, I am sure there are many others in the same position.

  • Kiwisaver balance $45,000
  • Paying rent $450/week
  • Wanting to use her Kiwisaver to purchase a campervan rather than a house.
  • Been in Kiwisaver for 10 years or more
So we crunched some numbers, as of today.  This is what we came up with:
  • Kiwisaver balance $45,000 plus $5,000 first home buyers grant
  • Keep paying the same amount as current rent $450/week
  • There is no way to use your Kiwisaver to purchase a campervan, but as another student in the class said, just purchase a home and hire a campervan when you need it, she liked this idea.
  • Withdraw Kiwisaver as a deposit for a first home.
During the class we looked at homes for sale, and found a two bedroom, in a local small country town for $240,000.  This would mean the following would apply:
  • Deposit from Kiwisaver $50,000
  • Make an offer on the house of $200,000
  • Keep paying $450/week but at $900/fortnight
  • Fix at best rate, currently 5.99% for 4 years
  • loan completely paid off in 8 years and one month
Granted this was a very cheap home and she had a 25% deposit, but it certainly goes to show this is not something that she has to wait five to ten years for, and she could still hire a campervan when she wants to travel.  In order to do this she could reduce her mortgage payment to $400 per week, which means she can put aside $50 per week into an account for campervan rent.  Her loan term would increase to 9 years and five months, still very achievable and better off than most!  She also has $2600 per year set aside for campervan rental (an expensive, luxury motorhome is around $250 per day, so 10 days per year).

This is a slightly oversimplified equation, but the bones of it are exact.  There are other costs such as house insurance, rates and maintenance that need to be included.  For this exercise I wanted to show how simple it was.

This particular person left my class to go to this specific property, this is a small town so she already knew of the house.  She wanted to know the process.  I told her to go to the real estate company and get them to fill out a sale and purchase agreement, offering the price and make it conditional on finance. Once they accept your offer go to the bank with the Sale and Purchase Agreement, then the bank has a deadline. She went off to do this.  Fingers crossed all goes well.  She asked if she needed a mortgage broker to do this, the answer is no, she doesn't, she asked if she needed an insurance broker to do this, the answer is no, she asked if she needed a lawyer to do this, I said it is wise to have a lawyer engaged when you make the offer, but get the real estate agent to draw it up to save you on legal fees.  

What is the worst thing that can happen in this scenario:
  • The seller doesn't accept her offer.  She has lost nothing.
  • She buys the house and it becomes too much for her on her own, she sells it (at a profit), goes back to renting with money in the bank.  She has lost nothing.
  • She doesn't make the offer and just considers it.  Updates her 5-10 year plan with more knowledge on the process.  She has lost nothing.
All of these are a positive, she will be in a better place next year than she is at the moment.  I love my job, this is the true reward to me.

Feel free to share this blog, follow, comment, question or like.  I love the feedback, keep it coming.  Thanks so much for reading.  Have a fabulous day!

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