We can provide tailored advice to take account of your personal circumstances, whether you are:
For impartial mortgage advice, book your free meeting to discuss your options and how I might take care of the application process for you. A coffee catch-up might suit, if you just want to touch base and talk about property and the mortgage process.
Fees
Generally, there is no cost to you the client when arranging finance for a residential property or investment property. This is because the lender that approves your loan pays approved financial service providers for successful applications. The lenders do not charge clients extra for using this channel - in fact some lenders give clients of ours better deals than they would get directly. There are no hidden costs.
First Home Buyers
Access to a wide selection of lenders provides MortgageLink advisors with the flexibility to advise which lender is best suited to your position, for example if your Loan to Value Ratio is above 80%.
We can help you structure your home loan and consider appropriate interest rates to fit in with your finances and financial plan. This will allow you to pay off your mortgage sooner and reduce the amount of interest you pay across the life of the loan. This will be done in consideration of your financial position, other investments and future plans.
We will guide you through the process of:
There is generally no charge for this service. This is because the lenders pay service providers for successful applications [see fees below]. So feel free to get in touch to make an appointment.
Buying a New Property
Have you grown out of your existing home, or do you need to relocate? We can discuss the options available to you.
This may involve bridging finance to allow you to go unconditional on a new home purchase, while you sell your current home. Or we could discuss holding onto your existing home as an investment property.
Investment
Purchasing an investment property? I can work with you to find a suitable lender establish the appropriate loan structure.
Re-financing or Re-fixing
Refinancing is the process or rearranging your loan. The reasons you might consider refinancing include:
We will be available help ensure that the structure and pricing of your mortgage continues to meet your needs. You will also need to be aware of the costs associated with break fees, should you wish to restructure your loan during a fixed-term period.
KiwiSaver
KiwiSaver members may be able to withdraw some of their KiwiSaver savings to put towards purchasing their first home. To be eligible:
It is important to apply for your first home withdrawal early, as you generally need to provide a KiwiSaver eligibility letter as part of the process of confirming your deposit. This letter includes confirmation of your eligibility to make a first home withdrawal, as well as an estimate of the amount available for withdrawal. This is a relatively simple process for most KiwiSaver providers, with most providing the ability to generate an eligibility letter and first home withdrawal application form through their KiwiSaver app or on-line, or providing instructions on their website.
Notes: 1. Funds transferred from an Australian Complying Superannuation scheme cannot be withdrawn for the purchase of a home; 2. If a member has owned a home before, they may still be eligible to withdraw their savings in some circumstances. If the applicant has previously owned property, but no longer own any property and their finances are considered to be in a similar position to that of a first home buyer, they may qualify to withdraw funds towards buying a home. The applicant will need to apply to Housing New Zealand for a KiwiSaver First-home Withdrawal Determination for Previous Home Owner. This can be done by the applicant without the help of a lawyer on the Housing New Zealand website below, which includes a list of the conditions regarding realisable assets considered in determining the application: https://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-features-for-previous-home-owners/
HomeStart
Members may also qualify for a HomeStart Grant provided that they have been regularly contributing to a KiwiSaver Scheme for at least three years. Income caps apply, the limits are presently $85,000 for singles and $130,000 for couples.
The level of the grant depends on whether it is a new or existing home – existing homes have a maximum grant of $5,000 for single applicants and $10,000 for couples; new homes have a maximum grant of $10,000 for single applicants and $20,000 for couples.
There are also house price caps, which vary by region.
The grant is administered by Kāinga Ora, who provide a 3-step guide at: kaingaora.govt.nz/home-ownership/
KiwiBuild
KiwiBuild is a government programme to build affordable homes for eligible first home buyers, in partnership with councils, iwi and private developers.
To be eligible you must:
As with other home purchases, you will also have to prove that a bank is willing to loan you the money needed and fulfil your lender’s deposit requirements.
A financial advisor can help you choose from the different lenders to help find a loan that best fits with your individual situation. You should also discuss options for accessing your Kiwisaver savings and whether you qualify for the HomeStart Grant.
Fixed, floating, revolving credit or interest-only loans
A floating rate loan is also known as a variable rate loan. This structure provides flexibility, but interest rates with go up or down in response to changes in the market environment
A fixed interest rate loan allows you to lock-in an interest rate for a selected period of time. This means that you know what your repayments are going to be for a set period, providing some certainty and planning benefits. These rates can be lower than prevailing floating/variable interest rates, which can make them particularly attractive at times.
Revolving credit loans operate like a large overdraft. Your balance must remain within a credit limit. Interest is calculated on the balance and not the limit, so by keeping the balance as low as possible borrowers can end up paying less interest over all. This is a particularly flexible structure, which may suit part of your loan. The flexibility comes from the ability to pay lump sums and irregular income to the loan, keeping the balance low thereby minimising interest payments. There is also the flexibility to use the balance between your balance and your limit, should you need to access some funds in the future, for example for renovations. For this reason, with the flexibility comes the need for financial discipline. Some revolving credit facilities have a reducing limit, to help ensure borrowers maintain their financial discipline. Revolving credit loans are generally on a floating interest rate; this may need to be given careful consideration if fixed interest rates are significantly lower than floating rates.
Interest only loans involve the repayment of interest over the agreed term, without the repayment of any principal. These terms are usually only available for 1 to 5 years, but can sometimes be rolled-over. They are more common for investment properties than owner-occupied property.
With 25 years in economics and finance I can help you understand the environment, outlook and an appropriate structure for your needs.
Bridging Loans
A bridging loan is a short-term loan to cover a specific short-term need, for example to "bridge" the gap between purchasing a new property and the sale of your existing property.
Loan to Value Ratio
The Loan to Value ratio (LVR) compares the the amount of your lending relative to the value of the associated property. It is calculated by dividing the value of your loan by the value of your property. For example, if the property is worth $500,000 and you need to borrow $400,000, the LVR will be 80%:
Deposit $100,000
Loan $400,000
Purchase Price $500,000
LVR =( Loan / Property Value)% = ($400,000 / $500,000)% = 80%
Until late April, the Reserve Bank of New Zealand placed restrictions on the amount of lending banks could provide at:
However, the restrictions were removed in late April to provide support in the wake of the COVID-19 outbreak and help avoid uncertainty the LVR restrictions could have had on the mortgage deferral scheme, which was introduced as part of the government’s support packages:
- Self-employed or a contractor
- Single or dual income earners
- A first-time buyer
- A non-NZ resident trying to get a home loan
- Wanting to re-fix your rates, or take advantage of lower rates
- Considering restructuring your existing loan
- Thinking about an investment property
For impartial mortgage advice, book your free meeting to discuss your options and how I might take care of the application process for you. A coffee catch-up might suit, if you just want to touch base and talk about property and the mortgage process.
Fees
Generally, there is no cost to you the client when arranging finance for a residential property or investment property. This is because the lender that approves your loan pays approved financial service providers for successful applications. The lenders do not charge clients extra for using this channel - in fact some lenders give clients of ours better deals than they would get directly. There are no hidden costs.
First Home Buyers
Access to a wide selection of lenders provides MortgageLink advisors with the flexibility to advise which lender is best suited to your position, for example if your Loan to Value Ratio is above 80%.
We can help you structure your home loan and consider appropriate interest rates to fit in with your finances and financial plan. This will allow you to pay off your mortgage sooner and reduce the amount of interest you pay across the life of the loan. This will be done in consideration of your financial position, other investments and future plans.
We will guide you through the process of:
- Advising on how much deposit you will need
- Using your KiwiSaver funds for a deposit
- Applying for a loan and arranging documentation through our lending platform
- Structuring your repayments to fit in with you finances and future plans
- Advising on fixed, floating or interest-only
- Getting pre-approval from a bank or other lender
- Kiwibuild
- How to get a property valuation
- Liaising with other local professionals, such as a solicitor
There is generally no charge for this service. This is because the lenders pay service providers for successful applications [see fees below]. So feel free to get in touch to make an appointment.
Buying a New Property
Have you grown out of your existing home, or do you need to relocate? We can discuss the options available to you.
This may involve bridging finance to allow you to go unconditional on a new home purchase, while you sell your current home. Or we could discuss holding onto your existing home as an investment property.
Investment
Purchasing an investment property? I can work with you to find a suitable lender establish the appropriate loan structure.
Re-financing or Re-fixing
Refinancing is the process or rearranging your loan. The reasons you might consider refinancing include:
- Debt consolidation if you have acquired higher-cost short-term debt (credit card, personal loans, hire purchase) and want to arrange for these to be consolidated into your mortgage to reduce the cost of servicing your debt
- Restructuring your mortgage to allow for better money management, for example to make use of revolving credit, or to better suit your present financial position
- To take advantage of better interest rates on offer with other lenders
- Accessing funds to spend on alterations or home improvement
- Investing in an additional property
- Increasing repayments to reduce the term of your mortgage and overall servicing costs
- Refinancing a home following separation, or divorce.
We will be available help ensure that the structure and pricing of your mortgage continues to meet your needs. You will also need to be aware of the costs associated with break fees, should you wish to restructure your loan during a fixed-term period.
KiwiSaver
KiwiSaver members may be able to withdraw some of their KiwiSaver savings to put towards purchasing their first home. To be eligible:
- Applicants must have been a Kiwisaver member for 3 or more years
- The member can use personal contributions, the employer’s contribution, government contributions, plus any investment returns, provided they leave a minimum balance of $1,000 in their Kiwisaver account1
- Kiwisaver funds can only be withdrawn to purchase a first home - not an investment property.
- If the applicant currently owns a home, land or has a share in a property, they will not be eligible for this feature.
- The applicant must intend to live in the property for at least six months.
- The member must have their KiwiSaver account with a KiwiSaver provider that allows saving withdrawals.
- The applicant will need to apply to their KiwiSaver provider to make a first home withdrawal, which if approved administers the payment of the funds to the applicant’s solicitor on or before settlement day.
It is important to apply for your first home withdrawal early, as you generally need to provide a KiwiSaver eligibility letter as part of the process of confirming your deposit. This letter includes confirmation of your eligibility to make a first home withdrawal, as well as an estimate of the amount available for withdrawal. This is a relatively simple process for most KiwiSaver providers, with most providing the ability to generate an eligibility letter and first home withdrawal application form through their KiwiSaver app or on-line, or providing instructions on their website.
Notes: 1. Funds transferred from an Australian Complying Superannuation scheme cannot be withdrawn for the purchase of a home; 2. If a member has owned a home before, they may still be eligible to withdraw their savings in some circumstances. If the applicant has previously owned property, but no longer own any property and their finances are considered to be in a similar position to that of a first home buyer, they may qualify to withdraw funds towards buying a home. The applicant will need to apply to Housing New Zealand for a KiwiSaver First-home Withdrawal Determination for Previous Home Owner. This can be done by the applicant without the help of a lawyer on the Housing New Zealand website below, which includes a list of the conditions regarding realisable assets considered in determining the application: https://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-features-for-previous-home-owners/
HomeStart
Members may also qualify for a HomeStart Grant provided that they have been regularly contributing to a KiwiSaver Scheme for at least three years. Income caps apply, the limits are presently $85,000 for singles and $130,000 for couples.
The level of the grant depends on whether it is a new or existing home – existing homes have a maximum grant of $5,000 for single applicants and $10,000 for couples; new homes have a maximum grant of $10,000 for single applicants and $20,000 for couples.
There are also house price caps, which vary by region.
The grant is administered by Kāinga Ora, who provide a 3-step guide at: kaingaora.govt.nz/home-ownership/
KiwiBuild
KiwiBuild is a government programme to build affordable homes for eligible first home buyers, in partnership with councils, iwi and private developers.
To be eligible you must:
- Be a New Zealand citizen, permanent resident or ordinarily resident
- Be a first home buyer (or a ‘second chancer’ in a similar financial position to a first home buyer)
- Have a pre-tax household income of no more than $120,000 for a single buyer and no more than $180,000 for two (or more) buyers
- You will also need to commit to living in your KiwiBuild home for at least one year for a studio or one-bedroom home; or at least three years for a home with two-bedrooms or larger.
As with other home purchases, you will also have to prove that a bank is willing to loan you the money needed and fulfil your lender’s deposit requirements.
A financial advisor can help you choose from the different lenders to help find a loan that best fits with your individual situation. You should also discuss options for accessing your Kiwisaver savings and whether you qualify for the HomeStart Grant.
Fixed, floating, revolving credit or interest-only loans
A floating rate loan is also known as a variable rate loan. This structure provides flexibility, but interest rates with go up or down in response to changes in the market environment
A fixed interest rate loan allows you to lock-in an interest rate for a selected period of time. This means that you know what your repayments are going to be for a set period, providing some certainty and planning benefits. These rates can be lower than prevailing floating/variable interest rates, which can make them particularly attractive at times.
Revolving credit loans operate like a large overdraft. Your balance must remain within a credit limit. Interest is calculated on the balance and not the limit, so by keeping the balance as low as possible borrowers can end up paying less interest over all. This is a particularly flexible structure, which may suit part of your loan. The flexibility comes from the ability to pay lump sums and irregular income to the loan, keeping the balance low thereby minimising interest payments. There is also the flexibility to use the balance between your balance and your limit, should you need to access some funds in the future, for example for renovations. For this reason, with the flexibility comes the need for financial discipline. Some revolving credit facilities have a reducing limit, to help ensure borrowers maintain their financial discipline. Revolving credit loans are generally on a floating interest rate; this may need to be given careful consideration if fixed interest rates are significantly lower than floating rates.
Interest only loans involve the repayment of interest over the agreed term, without the repayment of any principal. These terms are usually only available for 1 to 5 years, but can sometimes be rolled-over. They are more common for investment properties than owner-occupied property.
With 25 years in economics and finance I can help you understand the environment, outlook and an appropriate structure for your needs.
Bridging Loans
A bridging loan is a short-term loan to cover a specific short-term need, for example to "bridge" the gap between purchasing a new property and the sale of your existing property.
Loan to Value Ratio
The Loan to Value ratio (LVR) compares the the amount of your lending relative to the value of the associated property. It is calculated by dividing the value of your loan by the value of your property. For example, if the property is worth $500,000 and you need to borrow $400,000, the LVR will be 80%:
Deposit $100,000
Loan $400,000
Purchase Price $500,000
LVR =( Loan / Property Value)% = ($400,000 / $500,000)% = 80%
Until late April, the Reserve Bank of New Zealand placed restrictions on the amount of lending banks could provide at:
- Loan value ratios above 80% for owner occupied lending
- Loan value ratios above 70% for investment properties
However, the restrictions were removed in late April to provide support in the wake of the COVID-19 outbreak and help avoid uncertainty the LVR restrictions could have had on the mortgage deferral scheme, which was introduced as part of the government’s support packages:
- In removing LVR restrictions the Reserve Bank noted that it considers it unlikely that banks’ will weaken lending standards and the more likely risk is that they are overly cautious lending to credit-worthy borrowers
- The chart below shows that prior to the LVR restrictions being lifted, the banks’ were very cautious with respect to high LVR lending, to the extent that they were operating well within the limits. This was particularly the case for investment property, for which very little lending over 70% LVR was being undertaken.
Low Equity Margin (LEM)
The banks will normally charge a premium for home loans on lending above 80% of the value of the property; that is where the equity you are providing is less than 20% of the property's value. A LEM is basically a higher interest rate charged on your home loan to allow for the higher risk and additional funding costs associated with these loans. Each bank approaches LEM's differently. Some add a premium to their standard rates, for some it is reflected in the difference between 'standard' rates and 'special rates' and one sets a fee that is a percent of the loan fee.
The fee will also increase, as the loan to value ratio increases above 85% and 90%.
We can discuss your options if a LEM applies to your circumstances.
Uncommitted Monthly Income (UMI)
Fundamental to the home loan process is demonstrating your ability to repay the new loan and continue to maintain existing commitments. Lenders will want to be comfortable that your income is going to be sufficient to cover future expenditure patters, plus a margin to cover slippage, life’s changes and unexpected events.
One such approach in Uncommitted Monthly Income. This simply measures the amount that is left over once all of your monthly expenses have been deducted from your monthly income.
Lenders will look for you to provide an estimate of your total reliable income and monthly commitments, to show that you are able to afford the anticipated loan repayments, including supporting evidence. They will compare this against their own default values for the interest rate to be applied to the debt, as well as other household commitments. Each lender has a slightly different approach. Your financial advisor will help you navigate this process to ensure you meet the lender’s requirements. Lenders also have calculators to help with this.
Debt to Income Ratio
The debt-to-income ratio is a measure that compares your total monthly payments on your loans relative to your gross monthly income.
To calculate this, you add up your combined monthly payments on your lending (debt) to your combined gross monthly income (before taxes and other deductions). For example, if your monthly payments on loans is $2,000 and you have a monthly gross income of $5,000, your debt to income ratio is 40.0%:
DTI ratio = (Payments on Loans / Gross Income) % = ($2,000 / $5,000) % = 40%
Debt to Income Ratio (alternative approach)
An alternative measure used by the Reserve Bank is to compare total borrowing (total borrower debt) relative to total annual income:
DTI ratio = [total balance of borrower debts / total borrower gross income]
In the Reserve Bank’s statistics, the DTI ratio uses a broad measure of borrower debt. In addition to the loan value of the new mortgage commitment, it also includes any pre-existing mortgages, and incorporates any other loans that are considered in the bank’s serviceability assessment, such as credit card debt and loans to other lenders.
Borrower gross income is the annual income the reporting bank is prepared to count as part of assessing whether to extend a loan to a prospective borrower. It may include salaries and wages, self- employment income, or a range of other sources.
For example, if a borrower with no pre-existing debts borrows $500,000 and has gross income of $100,000, this would equate to a debt to income ratio of 5 under this methodology.
In 2019 around 40% of new loans had a debt to income ratio above 5, which is considered high; expect banks to be more cautious in 2020.
The banks will normally charge a premium for home loans on lending above 80% of the value of the property; that is where the equity you are providing is less than 20% of the property's value. A LEM is basically a higher interest rate charged on your home loan to allow for the higher risk and additional funding costs associated with these loans. Each bank approaches LEM's differently. Some add a premium to their standard rates, for some it is reflected in the difference between 'standard' rates and 'special rates' and one sets a fee that is a percent of the loan fee.
The fee will also increase, as the loan to value ratio increases above 85% and 90%.
We can discuss your options if a LEM applies to your circumstances.
Uncommitted Monthly Income (UMI)
Fundamental to the home loan process is demonstrating your ability to repay the new loan and continue to maintain existing commitments. Lenders will want to be comfortable that your income is going to be sufficient to cover future expenditure patters, plus a margin to cover slippage, life’s changes and unexpected events.
One such approach in Uncommitted Monthly Income. This simply measures the amount that is left over once all of your monthly expenses have been deducted from your monthly income.
Lenders will look for you to provide an estimate of your total reliable income and monthly commitments, to show that you are able to afford the anticipated loan repayments, including supporting evidence. They will compare this against their own default values for the interest rate to be applied to the debt, as well as other household commitments. Each lender has a slightly different approach. Your financial advisor will help you navigate this process to ensure you meet the lender’s requirements. Lenders also have calculators to help with this.
Debt to Income Ratio
The debt-to-income ratio is a measure that compares your total monthly payments on your loans relative to your gross monthly income.
To calculate this, you add up your combined monthly payments on your lending (debt) to your combined gross monthly income (before taxes and other deductions). For example, if your monthly payments on loans is $2,000 and you have a monthly gross income of $5,000, your debt to income ratio is 40.0%:
DTI ratio = (Payments on Loans / Gross Income) % = ($2,000 / $5,000) % = 40%
Debt to Income Ratio (alternative approach)
An alternative measure used by the Reserve Bank is to compare total borrowing (total borrower debt) relative to total annual income:
DTI ratio = [total balance of borrower debts / total borrower gross income]
In the Reserve Bank’s statistics, the DTI ratio uses a broad measure of borrower debt. In addition to the loan value of the new mortgage commitment, it also includes any pre-existing mortgages, and incorporates any other loans that are considered in the bank’s serviceability assessment, such as credit card debt and loans to other lenders.
Borrower gross income is the annual income the reporting bank is prepared to count as part of assessing whether to extend a loan to a prospective borrower. It may include salaries and wages, self- employment income, or a range of other sources.
For example, if a borrower with no pre-existing debts borrows $500,000 and has gross income of $100,000, this would equate to a debt to income ratio of 5 under this methodology.
In 2019 around 40% of new loans had a debt to income ratio above 5, which is considered high; expect banks to be more cautious in 2020.
Your financial advisor’s role is to help you understand and demonstrate your ability to service your loans.
Wills
We always advise that our clients review their Will at a significant life event, such as the purchase of a residential property and update it if necessary.
Every adult should have an up to date will, otherwise their wishes may not be accommodated on their passing. Furthermore, it can take significant time and money to administer the estate if there is not an up to date Will.
It is also important to keep a copy in a safe and accessible place, for example with your solicitor – and let the executor and loved ones know where it is..
[Read more]
Enduring Power of Attorney
We also recommend that anyone over 18 years of age considers an Enduring Power of Attorney (EPoA). An EPoA is used to take care of a person’s personal or financial matters if they cannot.
EPOA’s are usually associated with people heading into their senior years. However, an unexpected accident or illness can happen at any time, rendering you unable to make decisions for yourself. An EPOA will allow you to say in advance who is to speak for you in this situation, rather than having a court step in to decide who is to take charge.
[Read more]
Family Trusts
17th June 2020
A Trust is a legal structure to protect property and manage assets, such as your family home or investment properties. There are a number of good reasons to establish a Family Trust, however, it is generally not effective to establish a trust with the principal objective of avoiding tax.
[Read more]
Update
18th May 2020
Low inflation has been behind a more generalised theme of low interest rates in recent years. More immediately, the desire of central banks around the world to provide support through low interest rates has also played a significant role, particularly as the Covid-19 outbreak has taken hold. This was evidenced by the RBNZ slashing it’s already historically low interest rate setting, the Official Cash Rate (OCR), to just 0.25% on 16th March.
[Read more]
We always advise that our clients review their Will at a significant life event, such as the purchase of a residential property and update it if necessary.
Every adult should have an up to date will, otherwise their wishes may not be accommodated on their passing. Furthermore, it can take significant time and money to administer the estate if there is not an up to date Will.
It is also important to keep a copy in a safe and accessible place, for example with your solicitor – and let the executor and loved ones know where it is..
[Read more]
Enduring Power of Attorney
We also recommend that anyone over 18 years of age considers an Enduring Power of Attorney (EPoA). An EPoA is used to take care of a person’s personal or financial matters if they cannot.
EPOA’s are usually associated with people heading into their senior years. However, an unexpected accident or illness can happen at any time, rendering you unable to make decisions for yourself. An EPOA will allow you to say in advance who is to speak for you in this situation, rather than having a court step in to decide who is to take charge.
[Read more]
Family Trusts
17th June 2020
A Trust is a legal structure to protect property and manage assets, such as your family home or investment properties. There are a number of good reasons to establish a Family Trust, however, it is generally not effective to establish a trust with the principal objective of avoiding tax.
[Read more]
Update
18th May 2020
Low inflation has been behind a more generalised theme of low interest rates in recent years. More immediately, the desire of central banks around the world to provide support through low interest rates has also played a significant role, particularly as the Covid-19 outbreak has taken hold. This was evidenced by the RBNZ slashing it’s already historically low interest rate setting, the Official Cash Rate (OCR), to just 0.25% on 16th March.
[Read more]