Saving a deposit when you are a first home buyer means knowing all the ins and outs of mortgages in Auckland, as well as understanding the guidelines set out by the CCCFA. Buying a home and saving your first deposit is an exciting process, but it can be tricky. There is a 5-step process to saving your first deposit as a first home buyer, as outlined by the CCCFA. Here, Mortgage Masters in Auckland help explain it to you.
What is the CCCFA?
When you borrow money in New Zealand, the Credit Contracts and Consumer Finance Act, or the CCCFA, ensures that you are able to make informed choices, know what you’re agreeing to and can keep track of your debts. The CCCFA requires lenders to act responsibly at all times. It also provides protection when you:
- Take out a personal loan or mortgage
- Use a credit card
- Borrow money on an agreed overdraft
- Buy products and services on credit
The Five Step Process
- The first step when saving your deposit is to open an account with a separate bank or separate savings account. Title the account ‘home purchase deposit’. Then, block any withdrawals from this account. You need to focus on only one goal and that is to own a home.
- You need a savings target, say 5% or 10% for your deposit. This criterion will change, so ensure that you have spoken to your bank, mortgage broker or lender as well as researched any changes in the property market. During times of tight money lending and strict rules to achieve a loan, this deposit amount may even be required to be 20%. These conditions are based on the funding availability within the New Zealand property market at the time of your desired purchase as well as guidance by the Royal Bank of New Zealand.
- If you cannot save the required amounts, due to your spending patterns, then you can increase your Kiwi saver to 6-10%. If your Kiwi Saver has the main target of saving your deposit for your new home, then you should choose the fund that will not erode in the market fluctuation.
- Keep all of your expenses under control. If you spend recklessly, this will have a huge effect on your borrowing ability. Always remember that upon assessing your pre-approval, your money lender and underwriter will check your bank statements thoroughly for your spending habits, income and any trends that may put off the lender off from giving you a loan.
- If your family can give helping hand to raise the deposit amount, then this will of course help you to reach your goal sooner. If they are in the position to do so, consider speaking to your relatives about a donation, loan, or early release of trust funds.
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