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How to Move Cities When You Have a Mortgage

With more employers than ever allowing staff to work remotely, you may be thinking of buying outside the city limits. Without the long commute to work limiting your thinking, suddenly there is the possibility of buying in smaller, cheaper cities and working from the home office. The nice house and carefree lifestyle that is only a daydream in the big city is within reach. Sounds fantastic, we’re convinced. But before you start bragging to your workmates that you’re off to live the good life and will only be available on Zoom there are a few things to work through.

First up, make sure your boss isn’t just in theory supportive of your new virtual working life. Get the practical details written into your contract to ensure that when you get that lifestyle block you’ll definitely still have a job to pay for all those avocado trees.

If it turns out that you’re needed in person at the daily standup that your boss doesn’t even attend half the time then it’s time to start job hunting. While most employers now say they support flexible working, that can mean almost anything. Reach out to your industry contacts to find out which employers are likely to be okay with remote working. Or, of course, you can look for a job in the town you want to move to, the key is to have an income secured before you buy your new home.

What do the banks need to know when moving cities?

The banks must adhere to the Responsible Lending Act. This means you need to be able to prove that when you move postcodes you will still have an income. This means either:

  • written confirmation from your current employer that they’re okay with you working from home and in your slippers, or
  • a signed employment contract with a start date from your new, cooler employer.

How should I time my move to a different city?

When moving cities the hard part is getting all the moving pieces timed right. You need the job to be eligible to buy a house; however, once the job is sorted there can be huge time pressure to find a house, especially if you have a new job that requires you in your new town at a fast-approaching date. Living in short-term accommodation is often necessary, it’s not always easy to find but gives you the benefit of getting to know your new area better before buying.

Another option is to buy a house in your new town while remaining renting and working in your current city until a job eventuates. The bank would include your city rent costs when calculating your expenses and reduce the amount you can borrow accordingly. This can make it unworkable for many so if you can stay rent-free with family then definitely do so.

The above strategy could get you in a tough spot if you change your mind about moving cities and decide the house you bought will be an investment property instead. First, if you bought it using KiwiSaver, you are required to live in the house for at least the first six months. Failure to move into your new home may cause you to fail to meet this requirement. In this scenario, seek legal advice.

Second, most banks will require you to declare if you will be renting your home out soon after purchasing, which you may need to do while looking for a job. Banks audit mortgages after they settle and failing the audit will create a serious issue for yourself. If your plans change, be proactive and raise it early with your mortgage broker or bank to identify what your options are.

Here’s how we suggest you plan your move

We suggest the following steps if you’re looking to move cities:

  • get an estimate of what you could afford based on a realistic income in your new city.  One of our advisers can help you with this.
  • secure your income in the new city
    • negotiating a start time as far out as possible
  • get serious about hunting for your new home

At the end of the day, if you have to bridge the gap with short-term accommodation, that’s probably a price worth paying for a better life.

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