It's what you pay that counts

Ruapehu Bulletin, Volume 11, Issue 504, 21 September 1993, Page 7

It's what you pay that counts

Forget about the price you see quoted in the advertisement and forget about the percentage figure quoted for interest rates. That's the advice Doug McKee, a Nelson real estate agent and REINZ councillor, would give to someone considering buying a home for the first time. "What is really important is to ask how much is it going to cost me to get into a home of my own and what will be the weekly repayments," he said. The first part of the question relates to the costs up front. Such costs include the deposit, the valuation fee, solicitors' costs and the cost of moving. "The deposit is the largest of the initial costs but some people do not realise that it need not be large. I recently spoke with some people who thought they could never afford to buy. It turned out they had $20,000 in savings which was more than enough for a deposit." He points out that there

are a large number of homes selling throughout the country for $100,000 or less. Depending on the requirements of the lending institution, the deposit you need to find could be from $10,000 to $20,000. "It may be possible for someone with a reasonable income to get a

$85,000 home on a deposit on under $10,000. The important thing is to talk it over with banks and other lending institutions," he said. "If finding the deposit in cash, it is sometimes possible to borrow the deposit money from a relative or arrange a loan

against an insurance policy or other assets. However, if this course of action is taken, it is wise to let the lending organisation know." Valuation (or inspection) fees are payable by the buyer if the lending organisation requires an objective assessment of

the market value of the property. Inspections are normally undertaken by a registered valuer and in many cases the lender adds the cost on to the amount being borrowed so there is no up-front charge. Valuation or inspection costs vary but are in the Turn to page 8

What you pay counts

From page T \ order of $100 to $300 as arule. Doug McKee adds that while it is possible to handle one's own conveyancing - the legal work required to transfer property ownership - it is advisable for a first-time buyer to use a practising law firm which specialises in conveyancing. "There can be difficulties which a practised eye will be quick to spot. It is worth the peace of mind

to have the job done professionally. For a buyer the cost of a straight forward transaction can be under $600," he said. Tuming to the on-go-ing question of dollars and cents outgoing, Mr McKee says that it is usual for lending institutions to limit the amount they will lend to help preyent the buyer getting into financial difficulties. "A rule of thumb that is often applied is that repayments must not exceed one third of the buyers' combined incomes. In practice this usually works out at simi-

lar to or better than the cost of renting." He said that it makes no sense to rent a home if one can find the deposit and have enough income to service a loan.

"No matter what you do in life, you' 11 more than likely have less income once you retire. That income will go much further if you have paid off your mortgage and are not paying rent."