Getting your finances sorted
If you're thinking about buying your first home in the next year, now’s the time to start laying the groundwork.
Getting into a strong financial position early can make a big difference when it comes time to apply for a home loan.
From reducing debt to building your deposit, the steps you take now will help set you up for success later.
Here are 3 key areas to focus on over the next 12 months to get you on track:
1. Reduce your debt
It’s important to get on top of debt before buying a home.
Debt impacts how much you can borrow for your home loan.
As a general rule, every $1,000 of personal debt you have reduces how much you can borrow by around $10,000!
When you apply for a home loan, lenders complete a credit check to understand how you manage your money. A strong debt repayment history and a good credit score give lenders confidence in your financial habits.
Concerned that your credit score could affect your loan approval?
Unlike the Banks, at the Police Credit Union we consider each individual situation. We work hard to say 'yes', even if your score isn't perfect.
💳 Common debt to review:
Credit cards
Useful for emergencies or rewards! But even if you pay your credit card balance in full each month, the limit on your credit card is taken into account for your home loan application. You may wish to cancel or reduce your credit card limits before you apply.
Buy Now Pay Later
Buy now, pay later (BNPL) providers like Afterpay can quickly add to your short-term debt, so it’s important to curb these habits early.
Personal loans
Often used for big purchases, but multiple high-rate loans can be costly. Consolidating them into one lower-rate loan can help reduce interest and pay the debt down sooner.
Find out more about debt consolidation
2. Sort your deposit
You can use several different funds for your first home deposit, including:
a) Your KiwiSaver balance
You can use part or nearly all of your current KiwiSaver balance towards your deposit.
Once you've been pre-approved for a home loan, you’ll need to apply to withdraw your KiwiSaver funds.
b) Gifts from family and friends
You may be able to use gifted money from family or friends as part of your deposit.
c) Personal Savings
This includes money you’ve saved yourself, whether that’s through regular savings, investments (like Sharesies), or term deposits.
🎁 Gifted Deposit?
If part of your deposit is made up of gifted money, most of the big banks will require a gifting certificate or declaration to confirm that the money was a genuine gift and not a loan. Some lenders also place strict limits on how much of your deposit can be gifted.
At the Police Credit Union, we aim to make it easy and only ask for further confirmation in certain situations.
3. Save for extra costs
Your deposit isn’t the only cost involved in buying your first home.
Additional fees can add up to around $5,000 throughout the process.
Here are some of the main costs you’re likely to come across:
⚖️ Legal Fees: $1,000–$3,000
🏠 Building Inspections: $500–$1,000 per property
🚚 Moving Costs: $500 (DIY van hire) to $2,000+ (full service)
It’s important to have extra savings set aside to cover these expenses to help avoid last-minute stress. You want to be financially prepared on moving day!
🌱 Need to build your savings?
It's easy to grow your savings out-of-sight and out-of-mind at the Police Credit Union.
If you're a Police employee, we can set up a salary deduction to make it even easier!
TO RECAP...
1. Reduce your debt
Pay down as much debt as possible, while making sure all your loan repayments and utility bills are paid on time.
2. Sort your deposit
Work out how much you'll be able to pull together for your deposit, and take some time to understand any requirements or limits.
3. Save for extra costs
You could need an extra $5,000 as part of the house buying process. Make sure to have some savings stashed away.
Next Step -> Pre-approval preparation
The fine print
Normal lending criteria and a $100 establishment fee applies to all new loans.