Mortgage

Dec

2017

4 Tips to Get Your First Mortgage Loan Approved

Buying a home is, for most of us, the biggest financial investment we will make in our lives. So it’s no surprise that we can’t just walk into the bank and sign the dotted lines. For aspiring first home buyers, there are a few things you can do to increase your chances of getting your mortgage approved.

Tip 1: Get a Job, Stay in a Job

When banks lend you money to buy a property, they inevitably want to make sure you’ll be able to repay your loan. If you don’t have a consistent job, banks can’t be sure that you will be earning a consistent wage or salary to be able to meet your repayments. When you have consistent income, it not only makes it easier to assess how much you can afford, but also helps convince the bank that you will be able to make the repayments when they fall due. It also shows banks that you have the temperament and maturity to commit to something in the long term – which is exactly what your mortgage will be.

Tip 2: Reduce Debt

Another big factor which banks will consider is how much debt you owe to your creditors. You don’t necessarily need to have zero debt, but the less you have, the better. If you have credit card debt, or a loan on a car, it’s a good idea to try and reduce these as much as possible before applying for your mortgage. Not only will it improve your chances of getting approved, but might also increase the loan amount you can borrow.

Continued below…

Tip 3: Know and Improve Your Credit Score

Reducing debt will also have a positive impact on your credit score. According to creditsimple.co.nz, “A credit score is a number between 0 and 1,000 that indicates how credit-worthy you are, and how likely you are to pay your bills on time. Most credit scores are between 300 and 850. The higher the score, the better your credit rating is.” Banks keep a close eye on your credit score when deciding if they should lend you money – it’s a good idea to keep track of your credit score, and try improving it where you can. Credit Simple is a great, free website that can tell you your credit score and how to improve it.

Tip 4: Save, Save, Save

LVR (Loan to Value ratio) restrictions imposed by the Reserve Bank mean that you generally need a 20 percent deposit for the the value of the house you want to buy. In other words, for a $500,000 house (this is still realistic in places outside of Auckland!), you would need a deposit of $100,000. Let’s be real – that is a lot of money, and saving that amount won’t happen overnight. But the earlier you understand these factors, the earlier you should start saving, and the better prepared you will be when it comes to actually getting a mortgage and buying your first home.

Hey, we never promised getting a mortgage was easy. The tips above won’t approve your mortgage overnight, but you’re better off acting on them now rather than later. With the right knowledge, a bit of preparation, and the right mindset, you can greatly improve your chances of getting your mortgage approved.

If you’d like to compare mortgage rates to see what you might afford, head over to our mortgage comparison now. If you’re ready to take the next step, as well as get the best mortgage deal for your first home purchase, submit a loan enquiry with a PocketWise partnered broker – absolutely free.

Cheers,

The PocketWise Team

www.pocketwise.co.nz

Dec

2017

Mortgage requirements part 4: Tapping into the HomeStart grant

Saving up for a deposit on a house is no walk in the park. Luckily, the New Zealand government offers a few different schemes designed to make things a little easier for property newbies, with the HomeStart grant being one of the most valuable.

What does the HomeStart grant provide?

The HomeStart Grant is a KiwiSaver feature that provides eligible first home buyers with a sizable cash injection (paid to your solicitor).

If you’re buying an existing or older home, you can receive $1,000 for each year you’ve contributed to KiwiSaver. There’s a minimum grant of $3,000 and a maximum grant of $5,000.

If you’re purchasing a new home, a property bought off the plans or a block of land to build a new house on, the HomeStart grant is effectively doubled. This means you get $2,000 for each year of contributions to KiwiSaver, with a minimum grant of $6,000 and a maximum grant of $10,000.

Compare your Kiwisaver fund On Pocketwise with others to ensure your Kiwisaver fund is right for you.

Am I eligible for the HomeStart grant?

You may be entitled to a HomeStart grant if:

You do not currently own property or land.
You have never received a HomeStart grant or KiwiSaver deposit subsidy in the past.
You have been contributing to KiwiSaver for at least three years.
Your pre tax household income is less than $85,000 for one person, or less than $130,000 for two or more people.
You have a deposit of at least 10 percent of the property purchase price (including the HomeStart grant and KiwiSaver first home withdrawal funds).
You are going to live in the house for a minimum of six months.
The property costs less than the house price caps ($600,000 for Auckland; $500,000 for most other urban centres; $400,000 for everywhere else).

Check the official site for further eligibility criteria.

Need more help with the cost of buying a home? Save big in the long term by using our nifty calculator to get the best mortgage interest rates in New Zealand.

Dec

2017

Mortgage requirements part 3: Leveraging Kiwisaver

KiwiSaver is New Zealand’s savings initiative that combines your voluntary contributions with contributions from your employer and the government. It’s main purpose is to help you save for retirement, but in some cases it can also be used to help you fund the purchase of your first home.

Side note: If you’re not already a KiwiSaver member, we highly recommend joining ASAP – it takes the guesswork and discipline out of saving, and the money can rack up surprisingly quickly over the years.

How do KiwiSaver contributions work?

Kiwisaver contributions come from three sources:

You: A proportion of your pay (3%, 4% or 8% as chosen by you) is deducted from your earnings and invested for you into a KiwiSaver scheme.
Your employer: Contributes a minimum 3% of your gross salary.
The government: Contributes 50 cents for every dollar you contribute annually up to $521.43. To max this out, you must contribute at least $1,042.86 per year.

How can I use KiwiSaver to buy a house?

As noted, KiwiSaver is primarily centred around helping you save for retirement. However, you don’t necessarily have to wait until you’re grey and wrinkly to access your savings. If you meet certain requirements, you may be able to withdraw your KiwiSaver money to buy your first home.

You might be eligible if you:

Are buying your first home
Have been a KiwiSaver member for three or more years
Are going to live in the property

It’s important to note that you must leave at least $1,000 in your KiwiSaver account. Check the official site for more details.

KiwiSaver is an excellent tool for getting your foot in the door and, when combined with New Zealand mortgage rate calculators, can help you strengthen your financial position when purchasing your first home.

Dec

2017

Using your KiwiSaver membership to help buy your first home

If you are currently working (part-time or full-time), it’s likely that you are a member of the KiwiSaver scheme. This means that a portion of your income is automatically transferred to your KiwiSaver savings account, including contributions from your employer and the government. For most people, this money can only be withdrawn once they qualify for NZ Super (65 years) – but for first home buyers, there are several ways to use your KiwiSaver contributions to help with your purchase.

HomeStart grant

If you have been an active contributor to KiwiSaver for at least three years, you may be eligible for a HomeStart grant. Eligible members can get up to $5,000 for the purchase of an existing/older home (up to $10,000 for eligible couples), or $10,000 for the purchase or building of a brand new house (up to $20,000 for eligible couples).

Eligibility criteria (Find out full criteria on the HomeStart website):

The grant is for your first home
You have been an active KiwiSaver contributor for at least three years
Your income is below the income caps:
- $85,000 for individuals (increased from $80,000), or
- $130,000 (increased from $120,000) for a couple
House price falls below the price caps:
- Auckland: $600,000 for existing house, $650,000 for new house.
- Wellington, Christchurch, Hamilton, Tauranga, Queenstown and Nelson-Tasman: $500,000 for existing house, $550,000 for new house.
- Rest of NZ: $400,000 for existing house, $450,000 for new house.

As long as you live in that house for a minimum of 6 months from settlement date, the grant does not need to paid back = FREE MONEY! Don’t let your contributions go to waste – If you are a first home buyer, have been a KiwiSaver contributor for at least three years, and need a little boost for your house deposit, enquire about the HomeStart grant from Housing New Zealand! Note that the application can take up to four weeks before the grant can be paid out to you, so apply early, or even get pre-approved.

First-home withdrawal

If you have been contributing to KiwiSaver for a few years (minimum three years), you may have built up a handy balance which can be withdrawn to help with your first home deposit.

“You may be able to withdraw some of your KiwiSaver savings (provided you leave a minimum balance of $1,000 in your account) to put towards purchasing your first home.”

This means, if you have a KiwiSaver balance of $10,000, you may be eligible to withdraw up to $9000 (leave a minimum $1000 balance in the account) to help with your home purchase.

With increased lending restrictions by the banks, it is getting harder for first home buyers to fork up the cash to meet the required deposits. If you have been an active KiwiSaver contributor, contact Housing New Zealand or KiwiSaver to find out more about the HomeStart grant or KiwiSaver withdrawals. If you’d like to learn more about this, as well as get the best mortgage deal for your first home purchase, submit a loan enquiry with a PocketWise partnered broker – absolutely free.

Dec

2017

Mortgage requirements part 2: Am I eligible for the Welcome Home Loan?

As you might already know, you need a minimum deposit of 20 percent to secure a home loan in New Zealand.

However, there are some key exceptions. The Welcome Home Loan is one of them.

What’s the Welcome Home Loan all about?

The Welcome Home Loan is a mortgage product for individuals or couples with modest income. If you meet the eligibility requirements, you can access a Welcome Home Loan with a deposit of just 10 percent.

Housing New Zealand makes up the shortfall by providing lenders mortgage insurance to participating lenders, thereby reducing the financial stress on you, the borrower.

Lenders currently offering Welcome Home Loans include:

Westpac
TSB Bank
Kiwibank
The Cooperative Bank
SBS Bank
NZCU Baywide
NBS

Offers can vary between providers, so remember to always compare NZ mortgage rates in order to save on interest.

Am I eligible for the Welcome Home Loan?

You must meet the following criteria to apply for the Welcome Home Loan:

1. Modest income

Individuals can have a maximum yearly income of $85,000 (before tax). If you’re buying a house with friends or your partner, you can have a combined maximum yearly income of $130,000 (before tax).

2. Deposit of at least 10 percent

You’ll need a deposit of at least 10 percent of the property you’re planning to buy.

3. New Zealand citizen

You must be a New Zealand citizen or a permanent resident.

4. Buying below the price cap

Finally, the cost of the house you wish to buy with a Welcome Home Loan must be lower than the regional house price cap. This is set at $600,000 for Auckland homes ($650,000 for new properties), $500,000 in most urban parts of the country ($550,000 for new properties) and $400,000 everywhere else ($450,000 for new properties).

Check out the official Welcome Home Loan website for more details.

Nov

2017

Banks vs Brokers

So you’re looking to buy a house, and you want the best mortgage deal you can get. Do you go direct to the banks, or use a mortgage broker?

Here’s our take on what the differences are and how you can get the best deal.

You can get a mortgage directly from one of the many banks we have in New Zealand. Whether you go through a broker or directly to a bank, your loan will be with the end bank. You can also get a home loan through other lenders like finance companies and credit unions, but for now let’s just focus on big banks.

The advantage of going with banks is they usually had a wide range of mortgage products to choose from, and you can negotiate banking costs and loan application fees. Banks can also offer discounts on insurance, or even contribute to some of your legal bills, which can save you thousands of dollars in the short term. On the other hand, banks are also more cautious, and you may find it harder to get a loan if you don’t have a good credit history. If you plan on shopping around at different banks, this could become time consuming and frustrating!

This is where mortgage brokers come in. A mortgage broker doesn’t actually lend money, they just help you find a good deal by running around on your behalf. Unlike banks, mortgage brokers can find you the best deal from many banks (and other finance companies). Brokers already know the interest rates and application process with different lenders, so they can help you navigate the paperwork, as well as leverage their existing relationships with the banks to help get you better rates. Lastly, if you are struggling to get a loan from the bank due to bad credit ratings, brokers can usually provide some advice and even approach other lenders to try and get a loan for you.

So at this point you must be thinking that going with a broker is a no brainer, but is there a catch? Nope! And best of all, brokers won’t charge you a cent! They make their money from commissions that banks give them.

At the end of the day getting a mortgage is a pretty big financial commitment. Choosing a broker or a banker that you have a good relationship with, or are prepared to develop a good relationship with is very important. If you already have an established relationship with a banker then it might pay to haggle with them. For the rest of us, we’re almost always better off going with brokers.

We at PocketWise have partnered with some of the best mortgage brokers in New Zealand to help you realise your dream of owning a home. Enquire with us to see what we can do for you – zero cost, zero obligation, just a friendly chat to understand your needs.

Cheers,

The Pocket Wise Team

Nov

2017

Home Buying Glossary

The home buying process is full of language that could be confusing to understand. Here are some common terms and definitions used by people you will come across in your home buying journey.

Appreciation: An increase in the value of an asset, your house in this case. For example, popularity of the area your house is in or inflation of the housing market can cause your property to appreciate.

Asking price: The price a property is advertised in the market for – The price the property sells for could be different.

Auction: A public sale in which a property is sold to the highest bidder. Once the auction is above the reserve (a minimum price) amount, the seller must accept the higest bid.

Appraisal: The value of a property determined by a professional. Your lender will ask you to get an appraisal of a property you are interested in purchasing. This is usually done by a qualified appraiser.

BEO (Buyer Enquiry Over): An acronym used to indicate that the seller is looking for offers over the BEO price. E.g. BEO $500,000 means that an enquiry over $500,000 is more likely to be taken seriously. You can still submit an offer below this,
but it may not progress very far.

Body Corporate: A legal entity made up owners in a block of flats, townhouses or apartments, who look after the maintenance of shared spaces.

Capital gain: The difference between the amount you bought a property for and the amount you sold it for.

Certificate of title: A document containing the description of the property, proof of ownership and who has mortgage over it.

Conditional approval: An offer from a lender stating that they could be willing to lend you the money subject to meeting certain criteria.

Conditional offer: An offer that contains conditions. These conditions allow you to arrange finance, get a builder’s report and sell another property you may own.

Cross lease: A property in which a number of parties have ownership. Cross leases are usually found in flats, townhouses or properties that share a right of way.

Equity: The value of your property minus the amount you still owe.

Fixed interest rate: Interest rate stays constant for the set period of time.

Freehold: Describes a form of ownership of property where you own the house and the land it sits on. The ownership is not shared.

Leasehold: You own the building but not the land that it sits own. The owner of the land may change you rent to occupy the land. Assuming your lease payments are up-to-date you will still have exclusive access to the building for the duration of the lease.

LIM report: Land Information Memorandum (LIM) report is a summary of information that the council holds on a property.

Loan to Value ratio (LVR): The amount you wish to borrow as a percentage of the market value of the property you wish to purchase.

Low Equity Fee: A one off fee charged by banks at the start of a loan for customers who have less than 20% deposit.

Mortgagee: The bank or lender that has given you the money to buy a property.

Principal: The total amount you borrow.

Private Sale: The current owner of the property is selling the house without the use of a real estate agent. This can save costs, as the owner will not need to pay commissions to the agent after the house is sold, but also requires the owner to take care of the additional paperwork.

Rateable Value (RV): The value of a property set by the local council for the purpose of calculating rates. It is usually made up of land value, capital value and value of improvements.

Settlement day: The day the ownership of a property is legally transferred over from the seller to the buyer.

Tender: A method of purchasing a property by making private and confidential offers before a set deadline. Tenders must be made in writing – usually on a tender document from the seller’s real estate agent. Tender offers can be made conditional (based on finance, or selling your existing home, etc), but unconditional offers
tend to be more attractive to the seller. It is recommended to consult a lawyer before submitting a Tender.

Unconditional offer: An offer to buy a property without any conditions. A conditional offer can also become an unconditional offer once the conditions have been met.

If you want to calculate how much your repayments will be, use our repayment calculator.

Oct

2017

What is the difference between the rateable value and market value of a home?

In the quest to purchase your first home you’ll probably notice that some properties are advertised using different values, all of which can differ quite drastically.

While your bank probably uses its own appraisal methods to calculate your home loan rates in NZ, it’s still a good idea to know what the various terms means. Let’s take a look at the differences between two of the most common values: rateable value and market value.

What is a property’s rateable value?

A home’s rateable value (sometimes referred to as a government value or, in Auckland, a capital value (CV)) is essentially how much the government thinks the property is worth, and is used to determine rates.
It is calculated based on three key factors:

Capital value
Land value
Value of improvements

It’s important to note that rateable values are generated automatically via electronic analysis, a process that only takes place every three years. Consequently, the rateable value can be considerably higher or lower (sometimes by as much as 50 percent!) than a property’s true worth, and is not a good metric for assessing how much a home will sell for.

What is a property’s market value?

Market value is simply the amount of money that a prospective buyer are willing to pay for a house. Property valuers take a bunch of things into consideration when working out this value, including:

Current economic climate
Property sales statistics
Interest rates
Potential use of the land

To work out the most accurate market value of a property, you may want to enlist the services of a professional, though it is possible to do your own research and get a pretty good idea of what a home is worth. This makes it easier to start looking for the best mortgage and see if you can afford the repayments.

Happy Saving,

The PocketWise Team

Feb

2017

Mortgage requirements part 1: How much deposit do I need?

It’s absolutely true that putting down a larger-than-necessary deposit can help you save big on interest, but in some scenarios (high rents, good rates, favourable market conditions and so on) you’ll do whatever it takes to get that first foot on the property ladder.

In this series of articles, we’re going to cover the absolute bare minimum you’ll need to buy your first home:

Minimum deposit

As it stands, most mortgage providers in Aotearoa require a minimum deposit of at least 20 percent of the amount you want to borrow. Therefore, if you’re buying a property for $650,000, you’ll need to put down a deposit of at least $130,000. This deposit essentially covers the risk the bank is taking on by granting you a loan.

Even though deposit requirements are similar across most lenders, rates can vary substantially, so it’s always a good idea to compare mortgage rates in New Zealand before signing anything.

Are there any other options?

No matter how you look at it, a 20 percent deposit is a big chunk of cash, and many first home buyers struggle to save up the full amount. If this hits close to home, the good news it that you do have some options:

Loan guarantee: Under this arrangement, you borrow up to 80 percent of the property’s value from the bank using the property as security. The remaining amount is borrowed against the equity in a guarantor’s (often your parents or another family member) property.
Construction loan: In recognition of a housing shortage in many parts of the country, the government has implemented different rules for new properties. If you’re building a home and are going to live in it, many lenders will require a deposit of just 10 percent.
Buy as a collective: It’s also possible to split the upfront costs by combining your savings and buying a house with friends.

Stay tuned for part two, in which we’ll tell you how to make the most out of Kiwisaver.

Mortgage

4 Tips to Get Your First Mortgage Loan Approved

Mortgage requirements part 4: Tapping into the HomeStart grant

What does the HomeStart grant provide?

Am I eligible for the HomeStart grant?

Mortgage requirements part 3: Leveraging Kiwisaver

How do KiwiSaver contributions work?

How can I use KiwiSaver to buy a house?

Using your KiwiSaver membership to help buy your first home

Mortgage requirements part 2: Am I eligible for the Welcome Home Loan?

Banks vs Brokers

Home Buying Glossary

What is the difference between the rateable value and market value of a home?

Mortgage requirements part 1: How much deposit do I need?

Minimum deposit

Are there any other options?

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