in your best interests
Let’s be clear - not all banks are equal. At any given time some will have stricter lending policies than others, some will offer more attractive interest rates, terms and ‘cashback’ for certain deals etc. And this information isn’t advertised!
How, as the customer, you are expected to know which bank to approach is hard to fathom. Unless you have a mortgage broker in your corner of course!
By ‘employing’ (and I use that term loosely as the vast majority do not charge the customer for their services) a qualified, experienced mortgage broker you can take advantage of their inside knowledge. They may not be bank employees, but they are updated on the banks new policies, aims and criteria regularly - and this can really help ensure your application is given the best chances of approval.
A mortgage broker can ensure the your application lands on the right desk (of the right bank) depending on your needs/plans. They can also ensure you application is presented in the best light. It is in their best interests to ensure your ‘case’ is as strong as possible, and if that means fighting on your behalf then that’s what they’ll do. Is a salaried bank employee likely to fight on your behalf to the same extent? I doubt that very much!...
Mortgage brokers have built up relationships with all the main banks, and this is a massive advantage for the customer. How would you know if you are being offered the best deal if you only approach your current bank? An experienced mortgage broker can approach all of them - at no cost to you - in no time at all.
By having an experienced negotiator, who has seen lots of similar deals (so they know what can be achieved) you are putting yourself in the strongest possible position.
So, the first step is to engage a mortgage broker.
Key Elements for a Strong Application
Filling in a few forms is pretty straightforward, but if you’re not quite at that stage yet there are a few things you can do to ensure your application will be viewed as favourably as possible.
A great way to start the whole process is to touch base with us and let us know your plans. Whether you are months away from buying or you’ve just found the perfect house it is never too late to get assistance, and some expert advice.
Buying a house in Auckland has never been tougher. Prices have continued to rise at a very fast pace over recent times, making the dream of owning more and more difficult.
However, rather than dismissing the idea as unachievable it pays to contact an experienced mortgage broker as they can often find a way that you couldn’t on your own.
So how much do I need?
The standard answer to this question is 20%. Everyone rolls this number out like it is the only figure that works.
As an example, if you are looking to buy a property for $900,000 you will need to find $180,000 as your deposit. For a $600k property you’d need $120,000. These are scary figures for anyone starting out.
If you’re thinking you may as well give up now you wouldn’t be the first!
However, that’s taking 20% as the definitive answer. It’s not as black and white as that though.
The first thing to note is your deposit doesn’t just need to be cash that you’ve saved. KiwiSaver funds can be used if you are a first home buyer. Gifts from family can also be added into the mix to help bolster your deposit. Grants may be available too.
If you have family that already own a property they may even be willing to offer their property as extra ‘security’ and act as a guarantor. You can read more about guarantors here. Definitely worth considering!
The Banks and What They Don’t Tell You
The other key point to be aware of is bank policy. From time to time all banks tighten or loosen their lending criteria. Before you rush out the door to ask them though, this is never publicly announced. If you were to approach a bank directly they just won’t tell you.
They do, however, tell their better mortgage brokers....
Despite their websites, and adverts stating you need a 20% deposit it may well be that they are willing to lend up to 85%, or possibly even as high as 90% for certain clients. Achieving a $60,000 deposit is a far less daunting task than the $120k mentioned earlier!
Having an experienced broker on your side allows you to access this sort of inside knowledge - and act accordingly. For example, it may be that a bank will lend 85% for existing clients - so maybe it would make sense for you to suddenly become one of their clients?!...
The answer to how much you need really depends on a number of factors. The key point though is not to just take 20% as the final answer - it’s rarely as simple as that!
Make sure you have an experienced broker in your corner who can advise and direct you to the right lender, and walk you through the options to ensure your maximise your chances of an approval
Buying a new property, refinancing your existing mortgage or just getting some general home loan advice can be daunting, so searching out an expert makes a lot of sense.
Your property will almost certainly be your biggest asset (outside of your earning capacity) so you need to ensure you are dealing with a trustworthy, qualified adviser.
So what should your broker be able to offer you?
There are plenty of decent brokers to choose from in Auckland, but if you want to choose the best mortgage broker choose one that suits your needs - not theirs. At Auckland Mortgage Brokers we understand that finding the time to meet with a mortgage adviser can be difficult, so we tend to be more flexible than most and even offer a service that can be done online.
Unlike the main banks we can also offer our services outside traditional working hours, at the weekend, and without being tied to one bank.
You can check out some of our other services here.
At some stage you will need to decide which mortgage adviser to use, but the first step is to touch base and let them know what your plans are. It can be a scary prospect buying a new property - but we will walk you through every step of the of the process.
Using a guarantor can be a great solution if you are struggling to meet a lenders deposit requirements - but it can be a bit complex too. Brian, principle adviser at Auckland Mortgage Brokers, looks into the details for you.
As you can probably guess, each bank has a slightly different take on it, so your first point of action should be to contact us initially and let us know your plans. You can contact us here.
So how does a guarantee work?
Well, for those who can't quite manage say a 20% deposit banks may be willing to lend money if there is a little outside assistance (i.e. the guarantor). What normally happens is the bank (or lender) will secure a mortgage over your guarantors property in addition to the property you are purchasing.
The guarantee is normally limited to 20% (plus interest and charges in the event of default).
The banks put this extra security in place to mitigate any extra risks they perceive in lending to you. Banks aren't in the business of selling properties at mortgagee sales - but if something goes wrong they want to make sure they are well and truly covered!
It is normal for banks to require that you (the purchaser) can service the entire debt, but some may require that the guarantor prove they can service a portion of it too (20%). They may also require the guarantor to become a co-borrower of part of the debt.
Having a guarantor in place is fine for a while, but ideally you would want to have the guarantee released as soon as possible. For that reason it makes sense to have this set up for a relatively short period (say 2-5 years), after which you can refinance and have the guarantee released. During this period you (the purchaser) would reduce the debt sufficiently so the guarantee is no longer required, allowing the guarantee to be released.
Usually the purchaser(s) needs to prove they can service the entire debt. Some banks require the guarantor to prove they could service some of the loan (20%) and/or be a co-borrower of some of the debt.
For this reason the lender will require some financial information from the guarantor to prove they can actually cover the debt should you default. This may be a full application for some banks. Before a guarantor agrees to anything they should seek independent legal advice.
Security from a guarantor doesn't always need to be over a property. If, for example, your parents are happy to act as guarantors and have a large enough term deposit, this could be used instead. This can be a welcome relief for some guarantors as the thought of using their own home as security can be a little daunting...
Before you venture down this path it makes sense to contact us first to discuss. Use our 2min application form and we'll get back to you asap. If you haven't quite managed to save the deposit you'd hoped for yet then check out our info about the Welcome Home Loan and the Homestart Grant as these may ideal for you too.
IF SAVING FOR THAT DEPOSIT 20% DEPOSIT IT JUST TOO HARD WE HAVE A VERY WELCOME SOLUTION...A Welcome Home Loan allows you to borrow up to 90% of the purchase price of a property, making getting into your new home much easier than expected for those struggling to reach that elusive 20% deposit mark!
So, who is eligible for a Welcome Home Loan?
Welcome Home Loan has the following standard criteria. You will still need to meet the specific lending criteria of the participating lenders too by the way.
To be eligible you must be a New Zealand citizen or a permanent New Zealand resident (holding a 'Permanent Resident Visa').
Maximum Income Limits:
Minimum deposit Requirements:
You do still need to be able to contribute a minimum 10 percent of the purchase price of the house you are wishing to buy. This can be a gift, from KiwiSaver or from savings etc.
Maximum amount you can borrow:
The maximum amount you can borrow with a Welcome Home Loan depends on the region you are looking to buy in. Each region has a maximum house price cap that you must be within. The maximum loan amount available is therefore the house price cap less your 10 percent deposit.
The house price caps are as follows:
There are a number of lenders or providers who offer the Welcome Home Loan. Following a discussion we can help find the best, and most appropriate offer for you and your circumstances.
If you are a first home buyer, and have been contributing to Kiwisaver for 3 or more years you may be eligible for a HomeStart Grant of up to $20,000! You can read more about this scheme here.Homestart Grant - KiwiSaver Deposit Subsidy
If you're a little bit unsure about any of the above just let us know anytime using our 'Live Chat' feature (see bottom right of screen) or contact us here. We're here to help!