How do I know I can get the Mortgage I want?

How do I know I can get the Mortgage I want?

Good question and one which needs answering before seriously looking at buying or re-financing a property. With the answer you can begin to plan your new home or investment strategy, knowing what you can borrow and on what terms.

There are various ways of finding out. From calling the 0800 number of every Bank and Lender in the Country, filling out on-line applications or using the usually free services of a Mortgage Broker.

0800’s and on-line Bank calculators can be very misleading as the advice given is generic and not tailored to your specific situation. Nature of employment, amount of consumer debt you may have or that ‘glitch’ on your credit file whilst you were a student can dramatically change your ability to borrow.

The only sure way of making the right decision in property finance is to formally apply. This costs nothing and there is no obligation. At least you know exactly where you stand. Be careful about multiple applications though, as too many enquiries on your credit file do not help future applications.

Not all the Banks are the same! Whilst rates and products can be similar, the way the Bank is funded or insured can mean a huge difference in what they lend and fees.

As a qualified Mortgage Broker I would naturally say contact me or one of my fellow Brokers, but why?

Your own Bank may not deal with Brokers, so speak to them first. But always get a second opinion from a Broker. This is really important for high loan to value mortgages (90% plus) as some Banks charge huge Lenders Mortgage Insurance fees whilst other Banks have a much cheaper option. It’s usually the smaller Banks that charge more because they outsource the Insurance rather do it in-house. This insurance (LMI) only protects the Lender in the event of default NOT you the borrower!

If you are declined by a Bank, always speak to a Broker and explain why you were declined and by whom. All Banks have different credit policies and what your Bank saw as a problem, another might not. For example:

At 95% some Banks...
• Have a minimum income requirement, some don’t.
• Have a minimum property value, some don’t.
• Have a minimum size of property, some don’t.
• Have a minimum $ value for deposit, some don’t.

By seeking out a professional Mortgage Broker you will know about all this before making an application that will be declined. Being declined is not fun for anyone.

Presentation is always important and Credit people within Banks tend to be rather faceless, won’t pickup the phone to clarify a point and will often decline an application on a technicality. This is frustrating and can be avoided by talking through the application with a professional so that the application is made with the right ‘credentials’.
I’ve have seen many applications declined by a particular Bank only to be accepted by the same Bank when presented in the proper way. We all have our strengths and weaknesses and as a professional I know what makes the Banks tick.

If you are new to property then I would strongly recommend you to seek professional advice. Property finance is probably the most important financial decision you will make and getting it wrong can be stressful and expensive. Most financial advice is free as Brokers tend to get paid by the Bank and don’t worry, nearly all Banks pay the same so there is little incentive to recommend one Bank over another.

If you want to apply direct to the Bank yourself and are new to this, then you need to be aware of the four main principals on which a Bank makes a decision and concentrate on these.

Servicing. All Banks have different calculators and the on-line ones are only a guide. The fact you have paid $400 a week in rent does not mean that the Bank will approve your mortgage costing the same. Rent and Mortgage payments are very different in their eyes.

Credit. Again most Banks differ but if there is significant ‘adverse’ then the answer will be No. Don’t give up though, there are some Specialist Lenders that a good Broker can approach. However the deposit will need to be at least 20% and the interest rate will be higher. Sometimes this can be short term so can be looked at as a ‘means to an end’

Deposit. As a rule the bigger the deposit the better the chances of approval. This can be referred to as ‘hurt money’ as its money that you have put into the property and so will be reluctant to lose. This is why no Bank will advance 100% without either Guarantors or additional security (outside of the Welcomehomeloan) For high loan to value mortgages at least 5% of the deposit must be saved by you, or your Kiwisaver fund can be used if it qualifies.

Security. This does not mean you. It means the property, so even if you have an approval always insert a ‘finance clause’ in your Sale & Purchase Agreement, as the Bank have to approve the property too. Example might be a 95% approval for you but no good if you want to buy an Apartment as 95% on an Apartment won’t happen.

Whatever you decide to do, make sure the above points are covered. Your Broker knows this all too well and will make sure the application is put together properly, as Broker only gets paid if the mortgage is drawn down!

Regulation and Professional bodies. You wouldn’t use an unqualified person to fix your car, arrange your Will or operate on your leg. The same thinking should follow when dealing with a Mortgage or Insurance. There is new regulation in New Zealand relating to Financial Services and you should make sure your Adviser is a member of a Professional Body (NZMBA for example), is qualified to give you Advice in the area you want and is Registered as a Financial Adviser (FSPR).

So if you need professional, free and impartial Mortgage or Insurance advice I am always available to help. Check out my testimonials on Trademe to see what others think of my service!

Jeff Royle
Mortgage Broker

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