in your best interests
Buying your first home or a new property is an exciting time. Banks are advertising great rates. Choosing a bank couldn't be easier. Right?!...
Unfortunately, it’s not always as simple as it looks. For a lot of buyers, especially first home buyers, your first property may be purchased with a deposit less than 20% of the purchase price.
If borrowing more than 80% the advertised ‘special’ rates you see in the press may not apply to you. It is more likely that you will be offered the bank’s ‘standard’ rates (that are seldom advertised) and you may be subject to a Low Equity Fee or Low Equity Margin which can add a further 0.75%pa to your interest rates.
For those that have managed to save up a 20% deposit (or more) borrowing can be a lot less expensive. However, be careful not to immediately plump for the bank with the best advertised rate. Sure, it may look like a good rate but the very best rates are never advertised. These are the rates that an experienced mortgage broker sees daily, but the public don’t.
Engaging a mortgage broker gives you an advantage over the normal customer that deals direct with a bank. We know which banks to approach based on your circumstances, and we know what rates are achievable as we negotiate these each and every week.
As an example, one of the main banks is currently offering rates around 0.5%pa lower than their ‘special’ rates for the right deals. These aren’t advertised, so without a broker's’ insight knowledge you would never be aware of this.
The key to ensuring you get the best deal is to shop around - and that is where your mortgage broker can really add value. Our services are completely free, so make sure you contact us today to discuss your plans.
Buying a house in Wellington 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 mortgage broker on your side allows you to access this sort of inside knowledge - and act accordingly. For example, it may be that the 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.
Brian MacLean looks into tips, ideas and strategies you can use to get ahead financially..