Advice matters
How much to offer on your first home

Looking at buying your first home? Perhaps you’ve found ‘the one’ and you’re ready to make an offer. It’s an exciting moment, but remember, purchasing property is also a long-term financial commitment, so keeping emotions at bay is crucial.

Now, while we can’t tell you how much to offer, here are some questions to help you find the ‘sweet spot’.

How much can you afford to borrow?

Determining your borrowing power is a good place to start. When determining the amount you can borrow, lenders look at things like your income, how much deposit you have saved, your level of debt, and your monthly expenditure (to name a few).

Not quite sure where you stand? Get in touch. Our SHARE mortgage advisers can help you understand what lenders will consider, so that you can put your best foot forward with your mortgage application.

Plus, we can work with you to get a pre-approval from one or more lenders. A mortgage pre-approval is an official document stating the maximum amount that a lender is willing to give you, in some cases subject to certain conditions.

How much are you comfortable to spend?

The pre-approval document can give you a pretty good indication of the price range you’re working with. But rather than applying for the maximum amount allowed, it’s crucial to think about what you’re comfortable to spend, both in the short and in the long term.

Would repayments leave some ‘wiggle room’ in your budget – even if mortgage rates increased further? How much will you be spending in overall interest costs over the life of your mortgage?

A good rule of thumb is to avoid allocating more than 30 per cent of your monthly household budget to mortgage repayments. But again, it’s a rule of thumb: your needs might be different. Also, make sure you factor in other housing costs, like property insurance and maintenance.

A fixer-upper might be more affordable than a newly renovated house, especially if you’re competent enough to take some work on yourself. But even in that case, renovation and maintenance costs could turn a bargain into false economy.

What’s the market like?

Knowing how the local property market is performing can give you a step-up in price negotiations.

The Real Estate Institute of New Zealand (REINZ)’s monthly property reports provide a regional overview of key market trends, like sales activity and price growth. But if you’d like a more granular picture, the following websites allow you to check records, rateable values, estimates and recent sales for millions of NZ properties:

What’s the property you like worth?

While the websites we just mentioned are great for rough estimates, if you’d like a more accurate figure, you might consider getting a professional valuer involved.

Besides market performance, professional valuers will take into account upgrades or changes that may not have been included in other reports. However, keep in mind that valuations add to the overall cost of your purchase. And while you can make your offer conditional on the valuation, the fewer conditions you have, the more attractive your offer will look.

Having said that, we still recommend making your offer conditional on finance approval and building report – it’s the best approach to save you from an expensive mistake. Keep in mind that your lender may have a preferred valuer, which means you may need to pay again if you’ve used someone else.

Negotiation tips from the experts

According to Trade Me, “a good tip when making an offer on a house, or negotiating with a seller after an initial offer is made, is to offer an odd number. For example, rather than offering a round $810,000, go for something like $812,750. Not only could this mean you just pip a competitor at the post, it also gives the seller the impression you’re really going all out to secure their home.”

And of course, you also need to know when to withdraw your offer. Knowing your ‘walk-away price’ becomes even more important when you’re buying at auction. In the whirlwind of the moment, it can be easy to let emotions overtake rational thinking. But if you have an exact walk-away figure in mind, you’ll know that’s a ‘line in the sand’ not to be crossed.

Negotiation tips from the experts

Ready to start your home ownership journey? Click here to learn about five key things to consider, and don’t hesitate to contact us if you have any questions about your mortgage, insurance, or KiwiSaver. You can find an adviser near you here.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.