How Commercial Mortgages Work in New Zealand

When it comes to buying a home, many of us rely on a mortgage agreement to make our dream a reality. But have you ever wondered how commercial mortgages work? In this article, we'll take a closer look at what a mortgage is, how it works, and the deposit required for first-time home buyers.

What is a Mortgage?

A mortgage, also known as a home loan, allows us to borrow money from a bank or lender to buy a property. In return, we agree to pay interest on the amount borrowed over the period of the mortgage, which can be several years or even decades. The good news is that having a mortgage helps most of us buy a home years before we would be able to save the full price.

The Deposit

A deposit is the initial money needed to secure a property purchase. For first-time home buyers, this deposit is usually around 10% of the agreed-upon price of the property. For example, if you're looking at homes priced around $600,000, you'll need to save at least $60,000 as a deposit.

Government Help for First-Time Home Buyers

If you're buying your first home, there is government help available that can make a big difference. The Welcome Home Loan scheme, for instance, requires a 10% bank deposit. This means if you're eligible, you'll need to save $60,000 for a $600,000 home.

What Lenders Require

Most lenders require first-time home buyers to have a deposit of at least 20% of the amount borrowed, with the bank loaning the remaining 80%. For example, if you borrow $480,000 to purchase a property priced at $600,000, you'll need a deposit of at least 20%, or $96,000.

A commercial mortgage in New Zealand allows us to buy a home by borrowing money from a bank or lender. Understanding how mortgages work and the deposit required for first-time home buyers can help make the process less daunting. With government help available and a clear understanding of what lenders require, you're one step closer to owning your dream home.

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