Buying a house and acquiring a mortgage in New Zealand is a significant financial step, often accompanied by various costs beyond the loan amount. Understanding these costs is crucial to making informed decisions.
Here’s a breakdown of the typical expenses of obtaining a mortgage and buying a house in NZ.
Legal Fees
Engaging a lawyer or conveyancer is essential to handle the legal aspects of a property purchase. They ensure the property’s title is clear, conduct necessary searches and manage the transfer of ownership. Legal fees can vary but are crucial to ensure a smooth transaction.
Valuation Fees
Lenders usually require a property valuation to assess its market worth and determine how much they are willing to lend. Valuation fees can vary based on the property’s value and location.
Lender’s Application Fee
Lenders may charge an application or establishment fee for processing your mortgage application. This fee covers administrative costs. Lenders may choose to waive this fee.
Building Inspection and Reports
A pre-purchase building inspection is advisable to ensure the property is structurally sound and free from significant defects. While not mandatory, this expense can save you from unexpected repair costs.
Insurance
Most lenders require you to have some form of insurance coverage in place before finalising the mortgage. Home insurance and mortgage protection insurance are two good examples. Home insurance covers potential property damage due to unforeseen events like fires, natural disasters, or burglary. Policies like mortgage protection insurance protect you if you can’t meet mortgage payments due to illness, injury, or job loss.
LIM (Land Information Memorandum) report
You should always obtain a LIM report before committing to buy the house. This report provides your property’s information, including rates, consent for work done and any land issues or events like flooding or an earthquake. There is a fee to obtain it from the council. Be sure the report is up-to-date to ensure its accuracy.
Council rates
Council rates are one ongoing expense and vary depending on where you live. Your local council will have information on how much the rates are.
Homeowner’s Association Fees/ Body Corporate
If your property is part of a homeowner’s association or Body Corporate, you’ll have ongoing fees to cover shared maintenance costs and communal facilities.
Moving Costs
While not directly related to the mortgage, you must factor in moving costs. This includes hiring a moving company, transportation and temporary storage expenses.
Repairs and maintenance costs
These costs vary and depend on whether the house is old or new. Even if buying/building a brand-new property, any home requires a bit of TLC over a period of time. It’s easy to stay on top of the little jobs yourself, but for the big stuff like roofing, exterior repainting and plumbing issues, you’ll probably need to get the professionals in. It’s a good idea to plan for these extra costs early on.
It’s vital for homebuyers to budget for these costs beyond the property’s purchase price. Consulting with financial advisors, mortgage brokers, and legal professionals will clarify the costs based on your circumstances. Being well-prepared ensures a smoother transition into homeownership and avoids any unpleasant financial surprises.