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Hammer down debt and go to auctions

A Taupo¯ couple thought they could never win a house auction as first timers – they were wrong, writes

Mikaela Wilkes.

Christina Bougher, 31, and Mike Hay, 27, started thinking about buying their first house in mid-2020. By last November, they were busy saving every cent, and now they have bought a threebedroom home – in a way they never believed they could.

‘‘We joined a load of first home buying groups on social media, and we think the biggest misconception among first-home buyers is that you can’t win at auction,’’ Bougher said.

She and Hay started off only looking at houses they could offer on. But once they added auctions into the mix, she said the potential options opened up by 40-50 per cent.

The couple, who both work for an insulation company in Taupo¯ , saved their entire $105,000 deposit with KiwiSaver, which they had both been contributing to since starting employment.

‘‘We both bumped our KiwiSavers into the high-risk growth funds, which really helped to increase our deposit balance,’’ Bougher said.

But the change that had the biggest impact on upping their savings was moving into a significantly cheaper rental, and deleting any and all buy-nowpay-later apps.

The couple, and Bougher’s 6-year-old daughter, moved into a 60-square-metre rental in Kinlock, a small town about 20 minutes from Taupo¯ .

The rental cost them $325 a week, which was ‘‘far cheaper than anything in town,’’ she said.

‘‘For nine months we massively got on each other’s nerves in that small space, but we recovered a big chunk of our wages – about 20 per cent – that we weren’t even seeing previously. And it was one more motivation to get a place as soon as possible.’’

Bougher cut back on her clothes-buying habit, cut up credit cards, and deleted any apps that encouraged unnecessary spending.

She chipped away at clearing $10,000 worth of debt, which boosted their purchasing power from $588,000 to $670,000.

‘‘If you smash out debt, you will be able to borrow more as you have more ability to service a mortgage,’’ she said.

However, the couple decided to give themselves a price cap of $550,000, with mortgage repayments front of mind.

In addition, she and Hay saved for those costly extras: builder’s reports ($500 to $600 a pop), a valuation ($850), and lawyer’s fees ($1800 to $2000).

Finding a property within budget depended on narrowing their search to traditionally ‘‘cheaper’’ areas.

‘‘What we’ve seen, even in the one year we’ve been looking, is that all the cheaper suburbs are becoming first-home buyer areas, and the neighbourhoods are getting nicer,’’ Bougher said.

At first, they spent a few months watching the housing market to get an idea of how properties were priced, and what they might be able to afford.

‘‘There was a lot of learning.’’ She estimates they looked at about 35 properties, and they put pre-offers on two others, which didn’t cost them anything, but weren’t accepted.

They eventually put in an offer on their 1990s-build ‘‘starter house’’ in Tauhara, to bring forward the auction. It needs a lot of cosmetic work, but is structurally sound, Bougher said.

‘‘I don’t know if this would work for everyone, but it worked for us,’’ she said. ‘‘We got all our ducks in a row and made an offer of $525,000, which was more or less our max.’’

Bougher wanted to ensure they could put down a 20 per cent deposit to forgo the $850 valuation cost.

‘‘An auction is an icky feeling because it’s an unknown. You don’t know who else is going to be there. It was a stressful day, but we freaking did it. There was a lot of ugly crying.’’

Bougher initially believed auctions wouldn’t be an option for them as first-time buyers, because a deposit has to be put down within 24 hours. But the couple’s mortgage broker organised a temporary overdraft at the deposit amount, and their KiwiSaver funds paid this back automatically when they came through.

‘‘Be aware that these overdrafts are high interest,’’ she cautioned others. ‘‘Ours was $52,500 and the interest was $28 per day.’’

She stressed the importance of having a solid team behind you, including a great mortgage broker, real estate agent, and lawyer: ‘‘This is what they do all day every day, you should be able to lean on them and learn the ropes from them,’’ she said.

But don’t forget to shop around: ‘‘Most lawyers were charging $2300-plus, but I found ours for $1795 – so that saved us $1800 right there.’’

Homed

en-nz

2021-09-25T07:00:00.0000000Z

2021-09-25T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/282265258577470

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