Where’s My Money? Season 6, Episode 5
enable.me partners with rova to bring this podcast to life and stimulate the conversation about finances with everyday Kiwis. Where’s My Money? follows the story of Reagan – a man chasing the Kiwi Dream but feeling stuck living month-to-month – and his discussions with the experts about what he may be doing wrong and how to fix it.
One man. One million dollars of debt. One podcast to find a way out.
Where’s My Money? host Reagan White is back for the second in a three-episode Ultimate Home Buyer’s Guide series. This time, he’s talking to enable.me financial coach and experienced property investor Kristin Sutherland, and award-winning auctioneer Aaron Davis.
House-hunting can be a puzzling experience. Unless you’re a seasoned property investor, you’re unlikely to buy a house more than a few times (or for some, once) throughout your life. It means that everyone in the process – real estate agents, mortgage lenders, the banks, auctioneers – have more experience working with the mechanics of house purchases than you do.
We’ve put together this series to pull back the curtain on the behind-the-scenes movements, so you can be better equipped to face the ‘unknowns’ of the property market.
If you missed the first episode in the series, you can find the recap here. Reagan talked to Real Estate agent Paul Glover about the preparation you should do while house-hunting – and the right questions to ask so you can avoid property traps.
Before you step into an open home
You’ve decided that home-buying is one of your financial goals. You’ve done the hard work of saving up a deposit and ensuring your cashflow will be able to service a mortgage. You’re starting the late-night TradeMe Property browsing and putting feelers out to real estate agents. You may even have a new weekend hobby of attending open homes.
Amongst all this preparation, excitement and stirred-up nerves, there are the nitty gritty practical aspects of the home-buying process. They’re important to get right and, to do so, you’ve got to push through the emotion-tinged, rose-tinted glasses and focus on the outcomes you’re looking for with clear eyes.
Kristin sees this ‘push and pull’ all the time in her coaching office; she’s seasoned at helping her clients navigate this juxtaposition between the emotional connection to home-buying and the practical elements that need to come first.
“We need money to buy the house because if you go and you fall in love with it and we haven’t got the money sorted, you might miss out on it,” Kristin says, “And I don’t want people to miss something they fall in love with. So, before we step into the open home, ideally, we get the money sorted.”
Getting your finances in order
Banks want to minimise their risk when lending you money. When they look at your finances to determine what you can borrow, they’re not looking at you as a person or judging your choices from a moral standpoint – they just want to know that they’ll get their money back, ideally with interest.
Once you know the full picture of your financial situation and have talked to the bank, you’ll go through the pre-approval process for a mortgage, which will give you a maximum borrowing limit for your property search.
During the application process, they’ll look at your:
- household income and cashflow
- deposit amount
- existing short-term or long-term debt
- spending habits
- ability to service your mortgage interest rate.
But be aware: The bank may also put some parameters around your pre-approval – it’s important to be diligent when you check through your paperwork.
Kristin warns, “someone’s going to forward that [pre-approval PDF] on to you… and they’re going to say, ‘Great, we’ve got the money.’ Excellent. But what I would like the buyer to do is go and have a look: Is there any conditions?”
“It might be that you need to get a valuation on the property, which you know would change things if we’re going to auction… It might be that you need to close your credit cards and you weren’t aware of that… the bank can put anything on it likes.”
It’s important to slow down – even when it feels like the process is moving quickly – to read every document, get the LIM reports and building inspections, and make sure you’re making the best investment in yourself and your future with your property purchase.
The psychology of bidding at auction
Unlike the common perception that auctions are a “science,” and ruled by numbers and facts – one of New Zealand’s leading property auctioneers Aaron Davis see it more as an “art.”
“All homes are different and it’s emotional because people are investing memories, milestone celebrations, sweat equity they put into a property, money,” he says.
“So their emotions are high, the buyer’s emotions are high and there’s all this closing the gap that’s in the middle. So yeah, it’s an art.”
He says to have two numbers in your mind before you turn up to the auction. The first: the ideal number you’d “love to buy it for.” The second: an absolute maximum number you’d go to if “push comes to shove,” to get the property you want. Ideally, you’d get it for the first number, but you can still live with the second.
That’s the key to keeping the high emotions off the table in your bidding strategy – and not paying more than the property is worth to you. Make sure you’re buying a home, not buying regret.
“When you’re making a business decision, which it is – because you’re spending money – the preparation’s everything. So, know your numbers and then you’re 90% of the way.”
It’s useful to work with people who have a strong understanding of the property purchase process, how the banks and lending works, and get the right advice on your side. After all, it’ll likely be the largest asset you own.
At enable.me, we’ve helped thousands of clients work through getting their finances in shape and ready for pre-approval and, ultimately, settlement on a home or investment property.
We can help remove the headaches that may arise during the process and get you into the home or investment property that you want. Book an initial financial consultation today (costs apply) to discover what you can achieve with enable.me’s wealth of knowledge on your side.
Benefit from the full conversation with Kristin Sutherland and Aaron Davis below:
Disclaimer: The Where’s My Money? podcast and the information shared by host Reagan White and his guests does not constitute individual financial advice. If you’re interested in receiving financial advice, you can book a consultation with an enable.me coach. Costs apply.
