Michelle and Ryan's home buying story

"We did see a lot of places that weren't right for us, but I don't think we ever got disheartened. We were really happy when we bought our home; it was a real achievement."

Michelle and Ryan (not their real names) had been living and working in London, but planned eventually to return to New Zealand and buy a home.  They had managed to save a reasonable deposit while overseas. When they returned to New Zealand, they started looking around as soon as they had found jobs.  They started their search in earnest at the beginning of February, and closed the deal on their first home near the end of March.

Finding a home
Both Michelle and Ryan were completely new to the home buying process.  Although they found it a very exciting time, they also found they had a lot to learn.

They started by creating a list of ‘must-haves’ and ‘nice-to-haves’, which they used to evaluate and compare potential homes.  Along with some specific areas they had in mind, their ‘must-have’ list included:
• 3 bedrooms
• An older, character home
• A garage
• Good ‘flow’
• Good light.

One of the main methods they used to find potential homes was via the Internet, through real estate websites like Open2View.  They started looking while still living in London, to get an initial feel for the market, and continued to use the Internet throughout their search.  “I’d really recommend it,” says Michelle.  “Because we could see pictures of each home we found it a very useful way to filter out places that didn’t meet our needs, and build up a short list of homes we wanted to check out further.”

The couple physically looked through 15-20 houses before finding the one they bought.  “We saw it online,” says Michelle, “and rang the agent it was listed with to arrange a time to go and view it.  We both really loved it - it just compared so well to all the other places we’d been to.  We put an offer in the same night, and it was accepted.”

Making an offer
Deciding what to offer was one of the most difficult parts of the process for Michelle and Ryan, who say they’d probably do things slightly differently in retrospect.

The home had only been on the market for a few days and was for sale by tender, but the agent advised that the seller would consider offers before the tender closing date. The question was how much to offer.

“We had an idea of what the house was worth based on others we’d seen,” says Michelle.  “We also asked the agent what he thought.  He suggested a $10,000 range that he thought the seller would be comfortable with.  We made an offer right in the middle of that range, and it was accepted.

“We were really excited when the offer was accepted, but afterwards, we wondered if we may have paid too much.  There was a large difference between the Rating Valuation (RV) and what we paid.  We only had a week to fulfil any conditions so we didn’t get a valuation report at the time, (although we did get a builders report).  In retrospect I think we probably should have, even if just for our own peace of mind.  I’d say we probably relied too much on the agent’s recommendation.  They are working for the seller, not the buyer, and a valuation report would have given us an independent view.”

Michelle and Ryan did get a report from QV (www.qv.co.nz) at a later stage, and would recommend it to other homebuyers.  “The information it gives you is fantastic,” says Michelle, “for example comparable recent sales in the same area.  If I was buying another house I would definitely get one.  Having said all that, we are really happy in our home – we love it, and we’re very glad we bought it.”

Finance
Finance was another area that was confusing at times, particularly structuring their home loan.  “It was hard to know the best option for us.  There seemed to be so many choices and in the end it was up to us to decide.”

The couple arranged their National Bank home loan through a broker.  However, after the loan was confirmed they were handed over to their Banking Consultant at The National Bank, who worked through their options with them.

They eventually decided on an approach designed to help them reduce the size of their home loan as quickly as possible, while retaining flexibility.  They chose to put most of the loan (87%) on a one-year fixed rate, because they felt that interest rates may well be lower by the time the fixed rate period expired.  They also put a portion of their loan (13%) on a Flexible Home loan, with the idea of paying that off within a year.   

“Our goal is to pay the loan off as quickly as we can– putting some on Flexible was part of that. We also chose a 20 year term to pay it off earlier – our Banking Consultant showed us how much interest we could save if we did that and it was a lot!”

“One bit of assistance we got was that it takes a while to get used to paying a mortgage and to see how it’s all working out, so we shouldn’t lock ourselves into anything long-term initially. That’s one of the reasons we went for a one-year fixed rate term.  At the end of that year we’ll sit down with our Banking Consultant and do a Banking Review, then we’ll make a decision.  Ideally, we’ll look to increase the amount on the Flexible Home Loan so we can work away at that and pay it off without penalties,” says Michelle.

“The Flexible Home Loan did take a little while to get used to, but it’s working well for us.  We’re reasonably disciplined and we’ve paid half of it off already.  And it does give us flexibility – we recently got engaged and have a wedding to plan and pay for, so that may change things a bit!”

Settlement and moving
Moving was relatively easy – they hired a truck and moved themselves with the help of family and friends.  Like many people, however, they did experience a delay in getting the keys on settlement day, which was frustrating, but it was quickly forgotten in the excitement of moving into their new home.

A final word
Michelle says the home buying process for her and Ryan was a very intense and very exciting period.  “It’s really quite an emotional time – you’re looking every day, either on the internet or inspecting houses, so you’re very focussed on it.  We did see a lot of places that weren’t right for us, but I don’t think we ever got disheartened.  We were fortunate that we were both on the same page in terms of what we were looking for, and that was a big help. We were really happy when we bought our home; it was a real achievement.”

In terms of lessons learnt, Michelle says getting good, objective advice is important.  “In retrospect, we probably felt that we trusted the agent too much.  I’d definitely get a valuation report next time.  And we also got a building report from someone recommended by the agent, which turned out to be less than comprehensive – we’ve spent money getting repairs that weren’t identified in the report.  Next time I’d get an independent builder.”

“The other thing I’d say is to get assistance with how to best structure your mortgage – for instance, the difference in interest payments between a 15 and a 30 year loan is massive.  There are a lot of options, and you need to understand the advantages of each one and set up your loan accordingly”.