Navigating Your First Home Purchase in New Zealand

Finances: Know Your Numbers

Before stepping into an open home, you must establish your “buying power.”

• The Deposit: Most lenders prefer a 20% deposit. You can often buy with less but be prepared for a Low Equity Margin (LEM) – an additional interest charge (typically 0.25% to 1.5%) added to your mortgage rate until your equity reaches 20%.
• Pre-Approval: Obtain a mortgage pre-approval early. Usually valid for 3 to 6 months, it confirms your maximum budget and makes you a “serious” buyer in the eyes of agents.
• KiwiSaver: Check if you are eligible for a KiwiSaver First Home withdrawal.
• The “Hidden” Costs: Budget $4,000–$6,000 for upfront expenses, including building inspections, LIM reports, valuations, and legal fees.

The Hunt and Due Diligence

In New Zealand, “Buyer Beware” is the rule.  Due diligence is your best protection against hidden defects.  Your due diligence investigation should include:

• Building Inspection: Hire a building inspector. They check for structural integrity, moisture/leaks (crucial for “leaky home” era builds), and unauthorised DIY work.
• LIM Report: A Land Information Memorandum (LIM) can be ordered from the Council (takes ~10 working days). This reveals flood risks, soil stability, and whether the house’s decks, fireplaces, or extensions actually have Building Consents.
• Record of Title: Your lawyer will check the title to the property for Easements (rights for others to use your land) or Covenants (rules on what you can/cannot do, like fence heights or paint colours) or Caveats (notices of interests from other parties).

Making an Offer

There are three common ways to buy in New Zealand:

• Negotiation: You make an offer with conditions. Common conditions include:
  • Finance: Time to finalise the loan and KiwiSaver withdrawal.
  • LIM report and Building Report: Time to inspect and potentially pull out if issues arise.
  • Solicitor’s Approval: A “safety net” allowing your lawyer to review the fine print.
• Auction: These agreements are unconditional. You must complete all due diligence and have your finance 100% confirmed before you bid.  If the hammer falls and you have won, you are legally bound to pay the deposit that day and complete settlement on the specified date.
• Tender/Deadline Sale: You submit your “best and final” offer by a set date. To make your offer more competitive, try to complete your due diligence beforehand so you can submit with fewer conditions.

Going “Unconditional” to Settlement

Once your offer is accepted and all your conditions (Finance, LIM, etc.) are satisfied, the deal becomes Unconditional.

• Pay the Deposit: Usually 10% of the price. If you are using your KiwiSaver for the deposit, ensure your lawyer starts the withdrawal process at least 20 days prior.
• Loan and Insurance: You will work with either your bank or mortgage broker to confirm the loan structure. Once confirmed, your solicitor will receive instructions and loan documents from your bank. You will then meet with your solicitor (usually a week before settlement) to sign the loan documents, along with an Authority and Instruction (A&I) form for the transfer of the property into your names and ancillary documents.  You will also need to arrange house insurance at this time as banks require a “Certificate of Currency” before they will release loan funds.
• Pre-Settlement Inspection: You are legally entitled to one final inspection of the property before settlement to ensure the property is in the same condition as when you signed the sale and purchase agreement. This is usually completed a few days before the settlement day and arranged via the real estate agent.  During your pre-settlement inspection, you will check all chattels are in working order and that no damage has been done to the house.  If there are issues, tell your lawyer immediately so they can request that the issues be fixed.

Settlement Day

This is the day ownership officially transfers.

• The Process: Your bank will draw down your loan and send the funds to your lawyer, who will send them on to the vendor’s lawyer.  This usually happens between 10:00 am and 4:00 pm.
• The Wait: There is often a nervous wait while the banks process the transfer.  You cannot get the keys until the vendor’s lawyer confirms the money has arrived.
• Key Collection: Once “settled” the agent will arrange with you to collect the keys.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.