Wednesday, February 1, 2023

The Cautious Optimist: So, You Want to Buy a House? Here’s What You NEED to Know

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Welcome to our series The Cautious Optimist, brought to you by our pals at Tower Insurance, where we – forever the optimists – at Capsule look into those big life decisions you might be toying with and how to make sure you’re making the right decisions, like buying a house!

From finally embarking on that post-Covid big trip, buying a house and everything in between, we have all the big questions answered by the experts so you can be cautious AND optimistic (click here for our previous story on what you need to know before you travel internationally again!)

This week, we’re talking about the big one – buying your first house! House prices are finally going down, but is it that simple when it comes to getting on the ladder?

Ah, home ownership – how many of us have fantasised about posing in front of a ‘SOLD’ stickered for sale sign out the front of our first home? (If you live in Auckland, probably a lot!) Covid has really messed with people’s house-buying plans – I mean, it’s totally understandable if you decided dealing with a pandemic AND trying to buy a home at the same time was frankly bloody ridiculous. But with the market cooling, it’s a great time to resurrect your property owning dreams. We speak to Ray White real estate extraordinaire Ali Hellesoe and Tower’s Head of Product David Meaclem for their tips and tricks for finally buying a house.

Capsule x Tower

Getting on the ladder: A guide

Kia ora Ali! So, how do you know you’re ready to buy a house?

Before you look into buying a house, think about what your long-term goals are. These help you build a picture about your life situation, your family, and your financial situation. Many potential home buyers save with the goal to buy a house. Once you know what your long-term goals are, then you know what you need to do to get ready to buy a house.

Often, you’ll know you’re ready to buy a house when you see something you like pop up before you’re even properly looking. Once you do see something you like, you’ll know that you’re intrigued to investigate further. From there, the best thing is to go shopping – look online or in the paper, go to open homes and figure out what you do and don’t like.

Before you purchase a home, is getting the deposit together or convincing the bank to lend to you more important?

Both getting the deposit together and convincing the bank to lend to you are equally important. The bank wants to understand what type of property you can actually afford to buy and if you will be able to service your repayments for that property ongoing.

In the last six to 12 months, we have seen an adjustment in the banking industry, due to compliance, rate increases and tax changes. So, it’s good for potential buyers to investigate what they will need for a deposit, and what long-term lending will look like for them.

Ok, so you’ve got the deposit and the go-ahead from the bank, and you’re keen to buy a house. But, you’ve never done this before and it can be a little intimidating and confusing. How do you get your ducks in a row BEFORE you hit up a real estate agent such as yourself?

It’s key for first-home buyers to understand exactly what their budget is, and what options are available for them within that budget. A great way to understand this is by talking to a mortgage broker or advisor.

A mortgage broker can work with potential home buyers in a planning session, where they can understand the buyer’s position, help buyers make informed decisions and put time frames in place so they understand when they can make an offer. A mortgage broker can also help their clients work through conditions and can help buyers engage with other parties involved in the process, like insurers, lawyers and builders.

Is there a type of property you reckon people should look at for a first home especially? What would you look into right now if you were buying your first house?

This all depends on the buyer’s circumstances. Even when it comes to first-home buyers, everyone is in a different stage of life. Generally, a first home is usually just a stepping stone to bigger things – so you don’t need to look for your dream home when purchasing your first property.

It helps to figure out what your non-negotiables are, and if they fit into your lifestyle. Non-negotiables can be things like you have to live close to the beach, or close to work. Your non-negotiables define what sort of property you are looking for and where exactly you want to live.

If you are looking at your long-term goals when buying a house, then factors to consider are often lifestyle-focused, like what school zone is the property in. But if you’re looking for a stepping stone property, you may want to look at the grants and options available to first home buyers, such as KiwiBuild.

So, you have to weigh up how important your lifestyle is to you, versus climbing the property ladder quicker?

I think this comes back to your personal goals, and how motivated you are to get into property quickly. From there, you need to figure out what specific sacrifices may need to be made.

If you want to climb the property ladder, then think about what you are willing to compromise on now so that you can continue to climb the ladder in the future. It’s good to think about where you want to be in 12 months, and it’s a great feeling when 12 months on you achieve your goal knowing that you worked hard for it.

So there’s that rule that you have to live in your first house if you’re using your Kiwisaver, right – totally understand why it’s there, but how does that help you if, for example, you can’t afford to buy in your own city (yup, hi Auckland)?

It’s definitely difficult for first home buyers, but there are workarounds. The Hobsonville Point ballot system was a great way for first home buyers to get onto the property ladder, and generally, it’s easier for first home buyers to purchase a new build through schemes like KiwiBuild.

With Covid we are seeing more clients purchase their homes outside of Auckland. Now that many companies offer work-from-home policies, there is less incentive for many people to live in major cities. Others are choosing to purchase homes on the outskirts of cities, as they’re happy to commute further so they can purchase a home they can afford which also ticks all or most of their boxes.

What do potential home buyers need to know about the current housing situation/market?

The current market is quite positive for first home buyers, with house prices going down. Because of this, we’ve seen more first-home buyers come through than we have in the past couple of years.

Traditionally, more sellers choose to list their homes in spring, as sellers like to showcase their homes in the best light. But the changes caused by COVID have meant we’ve seen people choose to buy or sell their homes regardless of market conditions.

Let’s Talk Insurance with David:

And hello, David! What should people have in place before buying a house when it comes to insurance?

Definitely check that you’re able to insure a home before you put an offer in, this is as simple as going through the home insurance quote process, insurers will tell you at this stage whether the home is insurable or not. Not everyone realises most banks in New Zealand require home insurance before they will approve a home loan.

When hunting for a new home, you can find out the flood or earthquake risk for that property, and the estimated rebuild cost through Tower’s free, online, no-obligation quoting process before you even purchase the house.

Alongside house insurance, requesting a building report can be especially useful when purchasing a home. This will tell you the things that are potentially wrong with the home, such as gradual wear and tear. Home insurance is designed to be there for you when accidents happen. For example, if a tree falls on your roof after a storm and your roof is now leaking, you are covered. If your roof is leaking due to age, this will not be covered by insurance. A building report prepares you for the things you will need to fix on your own.

If you’re buying a pre-1940s house, a building report is especially important. Make sure to double-check the state of the roof, it’s the most important part of the house. Check to make sure electrics have been replaced and modernised, the home is well-insulated, the walls have been relined with gib and more modern fireproof products. Pre-1940s homes were built with scrim and thin wood panelling which are highly flammable, these are all things you need to be aware of, as this fire-risk can affect your ability to get insurance.

It’s also important to note that if you’re buying a fixer-upper as your first home, or want to add your own touch later on, it’s unlikely your home insurance policy will cover anything more than minor alterations. This is where policies like Tower’s Contract works – Renovation cover come in handy.

There are so many different types of house insurance – how do you pick the right one?

Our online Quick Quote tool is easy and fast to use. Or you can chat to a customer service rep who will talk you through the different options, or you can simply go onto the Tower website. A perk of insuring your home with Tower is that we cover total loss, up to your sum insured, if your home is destroyed in a flood or earthquake. Sum insured is the amount you have estimated it will cost to rebuild your home or replace a like-for-like asset. Don’t worry, at Tower we have a calculator available that will quickly help you estimate the potential rebuild cost of your house. If your home is destroyed by fire, Tower will cover your sum insured, plus an additional 20%. For total loss or major repair events that mean you can’t stay at your house, Tower will even cover temporary accommodation.

We price our home insurance based on a home’s level of risk using smart data for floods and earthquakes. This ensures our customers are not paying more than they need to, as they are paying for the exact level of risk for their home.

David Meaclem

This is the biggest purchase people will make in their lives – how do you put them at ease regarding insurance?

House insurance is a big deal, so we encourage people to shop around before they make a decision. Quotes from insurers are no obligation – make sure to take advantage of discounts for buying more than one policy. Tower customers can earn up to a 20% discount if they have three or more eligible policies!

Did you know that if you pay for your annual insurance upfront and then want to change providers within that time period, your insurer will refund you the rest of your money back from the point you change providers? So, while choosing insurance may feel overwhelming, just know that the most important thing when buying a home is to make sure it’s protected with insurance – you can always change insurers later.

We know when our customers purchase insurance, they are paying to protect their assets which means they are paying for peace of mind. As a house is generally a person’s biggest asset, it is essential for us to ensure we have our customers backs when they need us most. 

Real estate agents also have deals and processes in place to make the home-buying process positive for customers. For example, any home purchased through Ray White comes with its complimentary ‘Concierge’ service. With Concierge, you can seamlessly organise your insurance through Tower, book tradespeople and are eligible for a range of discounts with partner retailers.

What do people claim the most for when it comes to houses?

Tower sees a lot of claims for broken hot water cylinders during winter. Hot water cylinders are prone to frost damage, where pipes freeze and the pressure build-up leads to burst pipes or a broken hot water cylinder, and usually subsequent water damage. Insulating your hot water cylinder and pipes can prevent this, and is even something you can do yourself by wrapping insulation around the cylinder and pipes.

What’s the strangest house/contents claim you’ve seen?

Not the strangest but definitely a sign of the times, one of our newest and fastest growing claims is for the loss or damage of sunglasses, spectacles, earrings and hearing aids. This has been brought on by Covid, as customers are finding when they take their masks on and off, they mistakenly dislodge or lose things. We are calling these ‘mask-related claims’, from October 2021 until now, mask-related claims have increased by 359%!

Keeping your insurance in order seems like a big admin job – how do you do it?

Insurance renews annually. So, moving house is a great chance to catalogue your assets as you’re packing or unpacking. Proof of ownership is important when you are making a contents claim. Keep a digital record of paper receipts and take photos of valuable items, especially if you don’t have receipts. Lots of retailers will now email you receipts upon purchase, so definitely get email receipts if it’s an option.

Cataloguing your insurance is also the perfect time to check your sum insured for key items. Similarly, when people buy a home they tend to make other large purchases for example, furniture or appliances. So, make sure your sum insured on your contents policy is enough to replace old and new belongings if need be. Tower customers can do this on-the-go via their My Tower profile.

Covid supply chain issues and inflationary pressures have driven up the cost of many items, even building materials, which means having an accurate sum insured for your home and contents is especially important right now. Tower helps you work this out at renewal time. We’ll put your house through our rebuild calculator which looks at various factors, like inflation. From there, we can suggest an increase or decrease in your sum insured for your home, so that you’re getting the most out of your insurance and are adequately covered.

Tower’s online portal My Tower keeps your insurance in order so you can keep things simple. All your details are online in one easy place! You can pay your premiums, check your policies, sum insured, and even make a claim, all via your personalised profile. Tower has you covered from your home, contents and car, right through to the cat and dog, all with great multi-policy discounts!

Visit the Tower website for more information on their house insurance policies.

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