Are you ready for buying a home in New Zealand? Before you make this important step, you need to find out as much as possible about the mortgage loans available in the country. Find out how much you can expect to pay for financing the purchase of a new house.
The primary determinant of the cost of mortgage loans is the size of the principal amount. This is the amount of money that you borrow. The home prices are the major determinants of the loan amounts needed by buyers. Currently, the average price of a single-family home in New Zealand is $ 477,460. The priciest homes are in Auckland with the average price being $ 685,426. In the other major cities, Wellington and Christchurch, the average price is close to the national average. The country has one of the highest house price inflation rates in the world.
There are two types of mortgage loans based on the interest rate in New Zealand. The floating-rate loans are the most widely available. Currently, the average interest rate on them is between 6% and 6.5%. The fixed-rate loans give you the opportunity to have the rate fixed for a certain period of time, which can range from 6 months to 5 years. After the end of this period, you can choose to fix the rate again. Otherwise, it will become floating. The fixed rates are naturally higher than the initial floating ones. They start from 7.5%. Typically, the longer the fixed-rate period is the higher the interest rate will be.
It is worth pointing out that experts predict an increase in the interest rates in 2014 and beyond. The Reserve Bank of New Zealand is already taking measures for controlling the inflation and one of them is the increase of the Official Cash Rate. This is the rate which mortgage rates are based on.
Typically, commercial lenders require 20% of the value of the property in the form of a deposit. This is the amount of money that you have to pay out of your pocket when buying a house. Basically, the typical loan-to-value ratio is 80%. You can use savings and financial gifts for making the deposit.
The Welcome Home Loan scheme is offering mortgages with deposit of 10%. They are designed for those home buyers who can not afford to pay the deposit required by banks. There are loan amount caps that have to be considered. The KiwiSaver scheme is designed to provide financial support with the payment of the deposit.
Overall, the mortgage loans in New Zealand are not cheap, but with the right expert by your side, you will certainly find the best deal.