It’s always been hard to buy your first home but many are working harder to make it a reality.
So the question is how hard would you work?
Would you work harder if it was the difference between being able to buy your first home or stay renting?
Or would you wait and hope that some new Government initiative would be devised that may help you?
Some people will work really hard to enable them to buy their first home, while other people may think they are already working hard enough.
You Are Working Hard Already
Most Kiwis believe they are working hard, and they probably are.
But sometimes to get those things that we really want it does take a bit more of an effort. If you think about winning sports people – they are prepared to train that bit harder and push through the pain barrier to come out with a great result.
It’s similar with success in anything including buying your first home – you may have to work that bit harder and make some sacrifices that the average person might not be prepared to do.
They say “if you make an average effort you will get an average result” and this is true in sport, business and really in some many facets of life.
It’s not about life not being fair, it’s about giving yourself every chance of success.
Extra Income Makes A Huge Difference
When you are buying a house today the banks are looking carefully at your ability to pay the mortgage. They assess your application based on your deposit and income.
- The deposit – it is important and when you have less than 20% deposit then the banks are harder on how they “test” what you can afford. Of course over time you can save a larger deposit but it does take time and especially in areas where homes are more expensive. You may not want to wait in which case you need to accept that the banks are going to test your application harder and that means you need more income.
- Your income – the larger your income the better when it comes to getting a mortgage approved, but the banks are looking for consistent income which is wages and salaries, other incomes that can be proven as consistent over 2+ years and of course any benefits or boarder / rent that you may receive.
- Plus expenses – the banks have default minimum expenses that they apply to your living situation (single, couple, family etc) but they also review and assess your individual application based on what you spend on both living costs and any debts or other financial commitments that you may have.
Of course you can work on increasing the deposit and reducing expenses, but the easiest change may be to increase your income. You could get a part time job and immediately increase your income.
Getting A Part-Time Job
The good news is there are plenty of businesses looking for extra staff, and in roles that do not need any specific skills.
You just need to hop onto Trade Me Jobs or websites like Seek and they always have a range of part-time jobs available. Or you could approach local restaurant’s, cafe’s or supermarkets who are often looking for extra staff. Many of these employers have flexible hours that could work around your full time job.
My daughter works part-time in the kitchen at a local retirement village. She works 4-hours on a Friday evening and 6-hours on a Sunday which is 10-hours per week and as she is young she started on the minimum rate; however it’s a job she can do easily.
The minimum wage in New Zealand is now $21.20 per hour so if you could find an extra 10-hours per week to work than that’s an extra $212.00 per week or just over $11,000 per year and with employers also paying 3% into your KiwiSaver to help with your deposit. This is based on the minimum hourly rate, but you may earn more than that.
How much difference would an extra $212 per week make?
- A Home Loan Scenario : we had a couple come to us for a mortgage and they were earning what they believed to be a good income with him on $52,000pa and she on $83,000pa. They had a low deposit, a credit card and small personal loan, so the banks wanted to be sure that they could afford the loan and applied the test rate. We looked at getting a pre-approval and the maximum the bank would allow them to borrow was $580,000
- This allowed them to buy a very basic house in Auckland.
- The Extra $212 Per Week : when we added an extra $212 per week it changed the amount they could borrow, from $580,000 to $690,000 and this opened up the opportunity to buy a much better home. As well as meaning they passed the banks test rates and could afford the house that they really wanted, this extra money meant they could pay off their mortgage quite a bit more quickly and therefore could move from having to pay the low equity margin and that will save them even more.
It may not sound like a lot of extra money, but when you are needing to borrow money from a bank then every bit of income helps.
What about an online business income?
You might have considered starting an online business or some home based business, and while these are popular and certainly can be a good way to make some extra money the issue when applying for a mortgage is being able to “prove” the income if you have just started.
An example is the number of people that make money selling on Trade Me which people are doing as a side hustle, and many are making $200 or more a week with very little effort, but the banks will not accept this type of income until you can prove it over time.
Another popular option is being a social media sales rep which is another way to make money online working from home. It’s a part-time job perfectly suited to anyone who wants to make money online from the comfort of your home. One option is to be a Facebook live chat assistant where you will be paid to login to the businesses Facebook account and respond to frequently asked questions from customers. These are normally things like prices, refund policies and giving out discount codes. You can start almost immediately with full training provided which takes less than a day. Learn more HERE but remember that this extra income is not able to be used straight away for your mortgage application.
