Getting a mortgage for rental property

If you’re like the majority of homebuyers, you’ll require a mortgage to finance your new property purchase. To qualify, you must have a stellar credit score and own payment. Without these, the conventional path to homeownership may be inaccessible.

While a rental property mortgage is similar to a principal house mortgage in many ways, there are some significant distinctions. To begin, rental property loans have a greater default rate than other types of loans, owing to the fact that borrowers experiencing financial difficulties prioritise their primary residence’s mortgage first. Due to the increased risk, lenders often charge a premium for rental properties.

There are also underwriting rules to consider, which are typically stricter for rental homes. Mortgage lenders, in general, are concerned with the borrower’s credit score, down payment, and debt-to-income ratio. The same principles apply to rental property mortgages, but the borrower will likely face stricter credit score and debt-to-income ratio requirements—as well as a larger minimum down payment. Moreover, the lender may do a thorough examination of the borrower’s employment history and income, as well as enquire about the borrower’s prior experience as a landlord.

Numerous lenders have lower lending limitations for investors (i.e., they lend the majority of their house loans to owner-occupiers), and you will often need a 40% deposit according to the Reserve Bank of New Zealand’s LVR rules.

In general, lenders seek the following information from borrowers before approving a rental property mortgage:

  • Credit score: A minimum of 620 is required, with better rates and terms available for scores of 740 and above.
  • Down payment: LVR lending limitations on loans secured by investment property have been tightened in response to rising housing market concerns in that sector. Loans with a high LVR fall into this category if they exceed 60% of the property’s value (40 percent deposit). Loans with a high LVR cannot account for more than 5% of a bank’s total new lending in this segment.
  • Debt-to-income ratio (DTI): The DTI indicates the percentage of a borrower’s monthly income that is spent on debt repayment. Though the limitations are more lenient for primary residence mortgages, borrowers must have a DTI of between 36% and 45% to be eligible for a rental property loan.
  • Savings: Along with a favourable debt-to-income ratio, borrowers should have sufficient funds in the bank to cover three to six months’ worth of mortgage payments, which include principle, interest, taxes, and insurance.

Consider the following before making a purchase:

Exemption for new construction

Loans to individuals who are constructing a new property are exempt. The borrower must either commit to the purchase early in the development process or purchase the residence directly from the developer (within six months of completion). The exemption is available to both owner-occupiers and investors in residential real estate. The LVR guidelines make no provision for the amount of a deposit required for new houses.

Exemption for remediation

Loans are exempt if they are used for remediation (e.g., to address concerns with weather tightness), to bring a dwelling up to current building rules, or to comply with new rental property standards (for example, insulation). The exemption is available to both owner-occupiers and investors in residential real estate.

Stay away from a fixer-upper

It’s alluring to hunt for a house that you can purchase cheaply and convert into a rental property. That is generally not a good idea if this is your first property. Unless you have a contractor that performs quality work on a budget—or unless you are experienced at large-scale home improvements—renovating is likely to be prohibitively expensive. Rather than that, seek out a home that is priced below market value and requires only minor repairs.


There are tax issues associated with owning a residential investment property. Rent income is taxable, which means you must file a tax return each year. Gains on the sale of real estate may also be subject to taxation.

Tax rules often change and can be complex, so it’s essential to get regular guidance on your personal circumstances from an independent tax adviser or accountant. You can also find a tax guide on rental income on the IRD website.

There are a lot of different things to consider when buying a second home, our experienced broker would love to help you go through the process and all aspects of purchasing a second property. If you would like to know more about growing your property empire and make your mortgage work for you, talk to our expert broker today.

What kinds of properties are best to invest in?

Are you wanting to expand your investment portfolio by purchasing a residential rental property? If you make the right choice, investing in real estate can be both thrilling and rewarding. However, income and benefits aside, real estate investing might be intimidating for a first-time investor.

Investing in real estate is similar to searching for a diamond in the rough. You want it to look decent, but not so good that the price becomes excessive, and not so poor that it requires extensive work.

Most real estate search results prioritise attractive properties over fixer-uppers. As a result, you may need to seek outside the most common search strategies. Along with the internet, consider traditional networking and drive-bys.

By networking within the sector, you can learn about properties that have not yet been offered for sale. The more people who understand what you’re searching for within your investing network, the more eyes and ears you’ll have on the ground. This group comprises real estate brokers and property managers, as well as private lenders and even other investors.

Driving through leisurely but strategically located neighbourhoods can also go a long way. Fill up the gas tank, choose the neighbourhoods in which you wish to invest, and take the road. Homes that exhibit indications of suffering or neglect are frequently the finest buys. Consider piled-up newspapers, lawn garbage, and an exterior in need of TLC.

What kind of property?

Your choice of property will be determined by your budget, your objectives, the market, and your intended use of the property. There are a number of advantages and disadvantages to investing in single-family homes and condominiums.

Purchasing apartments rather than single-family homes may force you to contend with uncertain condo fees and a more difficult search for financing that must match particular criteria. For example, traditional lenders require that at least 50% of total units in a development be inhabited by purchasers of primary residences or second homes.

For beginners, the greatest investment property is typically a single-family residence or an apartment. Apartments require little maintenance because the building association handles outside repairs, allowing you to deal with the interior. Apartments, on the other hand, often command lower rentals and appreciate at a slower rate than units.

Single-family houses and subdivision lots typically attract renters for a longer period of time. Families or couples are occasionally seen to be better tenants than single persons, as there is an assumption that families are financially secure and pay their rent on time.

However, there are some advantages to investing in apartments rather than units. Apart from being more inexpensive, condos are typically located in trendy, desired neighbourhoods where a scarcity of available land limits the availability of single-family homes.


Banks’ financing criteria for investment properties are more stringent than for permanent residences. They reason that when times are rough, people are less likely to risk their houses than they are to jeopardise a commercial property. Prepare to pay a down payment of at least 30% to 40% of the purchase price, including closing charges. Have the property inspected completely by a professional and have everything reviewed by a real estate lawyer prior to signing.

Don’t forget to purchase adequate insurance. Renter’s insurance covers the tenant’s personal items, but the landlord is responsible for the structure, therefore insurance may be more expensive than for a comparable owner-occupied home. Mortgage interest, insurance, and depreciation on the property are all tax deductible to a certain extent.

Keep in mind that while selecting a rental property, it’s critical to look for one that provides a positive return and matches your investment objectives, such as capital gain or yield. Where you purchase will have a significant role in this. If you’re interested in learning more about how to expand your real estate empire and make your mortgage work for you, contact our professional broker today.

Features to consider before buying an investment property

Purchasing an investment property might be a smart fiscal move. If done correctly, you can earn a high rate of return through passive income, tax benefits, and capital gains. However, a high rate of return on your investment is not a guarantee—you must think strategically when selecting and acquiring your investment property, and you must follow both market trends and basic investment standards to determine whether your investment is a success.

Consider the following points before browsing or purchasing:


The location of your purchase will influence the type of renters you attract and your vacancy rate. If you purchase near a university, students will likely dominate your pool of prospective tenants, and you may struggle to fill vacancies each summer. Instead, a property near an intermediate school can attract long term and respectful tenants who are more likely to pay their rent on time.

Taxation of real estate

Property taxes will almost certainly vary significantly across your chosen area, and you’ll want to know how much money you’ll be losing. High property taxes are not always a bad thing—they might be beneficial in a desirable neighbourhood that draws long-term tenants, for example—but there are also undesirable areas with high property taxes.

The council’s assessment office should have all tax information on file, or you can speak with local homeowners. Make certain to ascertain whether property tax increases are likely in the near future. In times of financial difficulty, the government may increase taxes much beyond what a landlord can demand in rent.


If you’re dealing with family-sized homes, consider the quality of the area schools. While you’re primarily concerned with monthly cash flow, the overall worth of your rental property comes into play when it’s time to sell. If there are no good schools nearby, the value of your investment may suffer.


Take a walking tour of the neighbourhood and take note of the parks, restaurants, gyms, movie theatres, and public transportation connections, as well as all the other amenities that attract tenants. Town Hall may provide promotional literature that can help you determine the optimum location for a mix of public amenities and private property.

Area security

Nobody wants to live next to a crime hotspot. Neighbourhood crime statistics should be available from the local police or public library. Check vandalism and major and petty crime rates, and don’t forget to record whether criminal activity is increasing or decreasing. Additionally, you may like to enquire about the frequency of police presence in your neighbourhood.

Opportunities for advancement

The local council department will have information on existing developments or plans for the region. If a lot of building is taking place, the location is definitely a promising growth area. Keep an eye out for new developments that may have an adverse effect on the value of adjacent properties. On top of that, additional new housing may compete with your property.

Listings & Vacancies

If a neighbourhood has an exceptionally large number of listings, this could indicate either a seasonal cycle or a neighbourhood in decline—you must determine which is the case. In either instance, landlords are forced to reduce rents in order to attract tenants. Landlords can increase rents due to low vacancy rates.

Rents on an average

Rental revenue will be your primary source of income when investing, therefore you should be familiar with the area’s average rent. Verify that any home you are considering can command a sufficient rental income to cover your mortgage payment, taxes, and other expenditures. Conduct sufficient research on the area to determine its potential direction over the following five years. If you can afford the region now but taxes are likely to rise in the future, purchasing an affordable property now may result in bankruptcy later.

Natural Disasters 

Insurance is another expense you will have to subtract from your returns, so you need to know just how much it’s going to cost you.  If you live in an earthquake- or flood-prone area, insurance costs might eat into your rental revenue.

Our broker has been in the mortgage industry for over a decade now and has helped many kiwis climb the property ladder, if you are ready to jump in and invest in your future, contact us for a free consultation to get things going.

Is real estate still a good investment?

Are you considering purchasing an investment property? Given that real estate has generated many of New Zealand’s wealthiest people, there are numerous reasons to believe it is a solid investment. However, experts believe that, like with any investment, it’s best to educate yourself before investing hundreds of thousands of dollars. Many investors are fearful of the new housing laws, and they are questioning if it is still worthwhile to invest in property at this point.

The rules for property investors have altered, with the elimination of interest deductions on loans for rental properties and the extension of the bright line test to ten years. Consider the following variables and difficulties before purchasing your first rental property.

Determine if you have what it takes to be a landlord

While being a landlord can be a profitable source of real estate income, it is neither straightforward nor glamorous. Along with selecting the appropriate property, preparing the unit, and locating trustworthy renters, there are always maintenance challenges and headaches.

Are you familiar with the contents of a toolbox? How adept are you at drywall repair and toilet unclogging? While you could hire someone to do it for you or engage a property manager, both of these options will eat into your profits. Property owners with one or two homes frequently perform repairs on their own to save money.

To maximise the potential, investors must make prudent investment decisions. The location has a considerable effect on rental demand, tenant quality, and the rate of return on your investment. Therefore, seek out properties in areas with reasonable property values and relatively strong rental yields. This entails focusing on places with robust local economies and rapidly increasing populations.

How can I increase my chances of profiting from my property?

There are still techniques to increase your chances of profiting from property. The longer you hold a home, the more time you have to take advantage of any future property price increases (or recover from any falls).

Determine if the neighbourhood has adequate transportation and educational opportunities, as this can assist enhancing house prices or, at the very least, protect them from the worst dips.

Finally, if there is work to be done, it is more sensible to use your own paint brush. The less money you spend on the house, plus any increase in value when you sell, equals a larger profit for you.

The property’s return values

Property can generate two distinct types of results. One is derived from rent paid by tenants, while the other is derived from the property’s appreciation in value – referred to as capital gain.

Property investments are not deemed ‘liquid’ because they cannot be readily withdrawn. To obtain funds, we must either sell the home or increase the mortgage balance. This may not be simple – and additional expenditures like as valuation and real estate agent fees may apply.

Individuals purchase investment properties in order to profit from rising property values over time. In the near term, rent may generate little or no profit when expenses such as mortgage, insurance, rates, and upkeep are deducted. Additionally, if we sell within ten years of purchasing, we will be subject to income tax on the sale. (This is sometimes referred to as the ‘bright-line property rule.’)

Establish your margin

Wall Street corporations that acquire distressed buildings strive for returns of 5% to 7% since, among other costs, they must pay employees. Individuals should aim for a 10% return. Annual maintenance costs should be estimated at 1% of the property’s worth. Additionally, homeowners’ insurance, prospective homeowners’ association fees, property taxes, monthly expenses such as pest management and landscaping, as well as routine maintenance costs for repairs, are included.

The basic conclusion is that property investment is no longer a sure-fire way to make a quick buck in the present climate. However, for those willing to play the long game, there are still chances available. If you are ready to take the next step towards building your investment portfolio, we are experts, gives us a ring and let’s chat.

Top mistake first home buyers make and how to avoid them

There are numerous steps you can take to prevent making mistakes when purchasing your first property, ranging from early KiwiSaver comparisons to researching buyer’s agents.

We understand that there is a lot of information available regarding what you should do during your home-buying process. As a result, we’ve compiled a list of the top mistakes first-time home buyers make so you can avoid them.

Borrowing the maximum amount

When you’re looking to buy your first house, you would not be incorrect to believe it’s a smart idea to see how much the bank is willing to offer you. Once you get this amount, you may rejoice for a minute before proceeding to purchase your ideal home. Then you’re finished, right?

Just because the bank claims it can lend you a particular amount does not mean it is the sum you can actually afford.

Sure, they give you a figure depending on your earnings and financial position. However, you must evaluate how mortgage repayments may affect your present financial condition. It’s a good idea to step back a bit and examine your monthly costs. This might give you a better idea of how much of an impact a mortgage can make in your life.

A decent rule of thumb is to restrict your monthly mortgage payments to less than 30% of your average earnings. If you believe the sum you’ve been approved for is too tough to sustain during the term of the loan (don’t forget how long a house loan can be! ), it may be a hint that you should save some more money and raise your deposit size instead.

It’s also fine to wait a bit longer; this is your trip, and you want to be comfortable every step along the way. It is critical not to overextend oneself.

Not shopping around

Finding the first home that meets your requirements is a thrilling experience. You might envision yourself wandering through the corridors, sleeping in the bedroom, or watching TV in the lounge. However, it is critical that you do not allow your emotions to take over and make a decision before evaluating all of your possibilities.

Use price-finding tools to locate neighbourhoods that may be within your price range, and consult with a reputable local real estate agent to help you narrow your search. You may lose out on the next property if you choose the first one you like.

Neglecting loan pre-approval

Many first-time home purchasers do not get pre-approved for their first mortgage. A pre-approval statement from your bank provides a fantastic beginning point for your budget, and it also makes the purchase appear much more appealing to sellers because they know there is less chance of the deal falling through.

It may take a few days, but receiving a pre-approval letter as early as possible makes the entire procedure much easier.

Holding on to your debt

When it comes to debt, everyone’s situation is unique. The more debt you have, the less money you can borrow. You may, for instance, have a car debt, a college loan, and some credit card bills. Not only may this have an impact on your borrowing ability, but you should consider adding this existing debt to your mortgage obligations. This will almost certainly have an effect on your cash flow.

Not having a Plan B

We all want to believe that everything would go well in life, especially those times that we’ve been anticipating for a long time. Whether you utilise your Plan B or not (we wish you don’t), it’s useful to know what you would do if things do not go as planned.

Your circumstances may change suddenly, causing you to be unable to repay the loan. For example, if you’re buying a house with your significant other, consider what you’d do if something bad occurred to the relationship. It’s critical to understand how you’d make it work.

A great way to ensure you avoid these mistakes is getting expert advice. Gives us a ring and we can help you sort out the do’s and don’ts of buying your first home.

Invest or pay off your current mortgage?

It may be tempting to pay off your home loan early if you’ve received a fortune of cash or accumulated a significant quantity of money over the years. Whether or not paying off the mortgage early is a smart idea depends on the borrower’s financial situation, the rate of interest on the loan, and how near you are to retiring.

The six factors to examine are as follows:

  • The current market value of your house
  • Your mortgage interest rate
  • Home growth in your region
  • Your income tax rate
  • Inflation expectations
  • An anticipated rate of investment return

Paying off the Mortgage Early

Some homeowners opt to pay off their mortgage early, and the advantages vary based on the individual’s financial situation.

Retired people, for example, may wish to minimise or erase their debt because they are no longer generating an income from employment. In other situations, consumers may wish to reduce their monthly cash withdrawals by refinancing their mortgage.

Depending on the form of your current mortgage, you may need to verify with your lender to be sure there are no fines for paying off your loan early. Fixed-term mortgages, in general, would pay a ‘break charge’ if returned prematurely, but floating or revolving credit agreements would not incur these costs and may be settled at any moment.

One of the most significant advantages of paying off your loan early is the reduction in interest payments. You may save tens of thousands of dollars in interest payments. When you pay off your mortgage early, you are assured a return on your investment.

Paying off your mortgage quicker means you’ll have greater equity in your house sooner. This can make you eligible for refinancing, which can save you much more money over time. You may also be able to capitalize your equity through a home equity loan, which you may use to make renovations that raise the value of your property or to repay off another higher-interest loan.

Investing in the Market

If a homeowner is thinking about paying off their mortgage early, it’s worth thinking about whether part or all of the cash might be better served investing in the financial markets. For the final ten years of the loan, the rate of return on investment may surpass the rate of interest paid on the mortgage.

In other words, the capital cost, or the interest that could have been generated in the market, should be addressed. However, several variables must be considered while assessing an investment, including the projected return and the risk involved.

The potential of compound interest over time is something to keep in mind while investing. The earlier we begin investing, the longer we have to wait for compounding to take full effect. If you are willing to accept some fluctuations along the road, investing rather than having to pay extra on your mortgage may be a better option for you.

Investment Gains vs. Loan Interest Saved

If a homeowner chose to invest $100,000 rather than pay off their mortgage in ten years, they would earn $22,019 based on a 2% average rate of return. In other words, there would be no discernible difference between investing the money and paying off the 3.5 per cent loan.

With a 10-year rate of return of 7% or 10%, the borrower would earn more than double the interest saved from paying the loan off early even with using the 5.5% loan rate.

If you’re still on the fence about which option is best, you may not need to choose between paying your mortgage early and investing. Rather, you can take a two-pronged approach to reducing your debt and growing your wealth. To discuss the best option to suit your lifestyle, contact our expert mortgage broker.

Stay on track with New Year financial checklist

New year is approaching which can bring a lot of stress along. Not sure where to begin? Our financial checklist for the New Year could be your starting point to get your financial priorities back on track in 2021.

Review your home loan

Your mortgage is probably going to be your largest financial obligation. As a result, it’s critical that you don’t pay more than you have to. If you’ve had the same loan for two years or longer, you might be able to receive a lower rate from a different lender.

And, if 2022 is the year you want to start as a first-time home buyer, now is the time to seek professional guidance and begin the initial steps towards making your goal a reality.

Re-examine your budget

Take stock of your money in 2021 to find your budgetary focus. Spending a few minutes examining your costs may guarantee that you are only spending on necessities. A simple review of your transactions and credit card accounts can identify areas where you may be able to cut back on spending.


Consider the coming conclusion of the financial and tax year. Making a note of any insurance plans that may provide tax benefits is one example. Determine if a trust or other method might be beneficial.

In case you didn’t know, charitable contributions are tax deductible – that is, you may get 33.33 cents on the dollar back from Inland Revenue, New Zealand’s tax collecting agency. Despite this, most individuals never file a claim, which is simple to do online.

Take steps to build an emergency fund

You never know when such unexpected costs may occur. But when they do, they may pack a powerful punch. Having funds saved aside can be a valuable resource for dealing with unanticipated expenditures. If you don’t already have an emergency savings account, three simple steps might help you get started.


  • Examine Your Budget – If you’ve never made a budget, it’s absolutely a worthwhile endeavour. A budget provides you with a comprehensive perspective of your money and assists you in regaining control. Your budget should contain how much money is coming in and how much money is going out over a specific time period. This manner, you can identify where you may cut back and prepare for future costs.
  • Choose one thing, cut it, and save money! – Is 2022 the year to say goodbye to everyday takeout and underused gym memberships? Choose one monthly expenditure, consider how you can minimise it, calculate how much money you’re saving each month as a result of this easy adjustment, and save that money in your emergency savings.
  • Prioritize your saving habits – Don’t stop simply because you’ve reached your first savings goal! Increase your savings objectives gradually until you have a substantial buffer for unforeseen situations. It’s a fantastic way to relax and unwind without having to worry about money.

Dream big, what can be improved for 2021?

With a new financial health baseline in place and year-end financial responsibilities completed, it’s time to look ahead to 2022 with fresh eyes. Will this be the year you buy your first house, a second home, a new car, a kitchen remodel, or braces for your child?

Do you want to get out of debt? Increase your emergency savings to cover a half-worth year’s of expenses? Do you have an estate plan? Perhaps you’d like to assist your adult children in purchasing their first house, or you’d like to retire earlier than you had planned.

Your financial house, like any other, requires ongoing maintenance. With the approach of summer and thoughts turning to a happy and healthy 2022, what better time is there for a review of your financial wellness? Contact and we can help make you’re your 2022 plan in on track to meet all your goals.

How to accelerate your home loan application

Have you discovered a dream house or an investment opportunity and require a quick home loan approval? A rapid house loan is achievable if you act promptly, are organised with your mortgage application paperwork, and choose the appropriate lender!

In today’s heated property market, a quick house loan approval is critical and can offer you an advantage over other buyers. The speed with which a house loan is approved is determined by a variety of criteria that differ across lenders. It should not take weeks to apply for a house loan. A few preparations can assist to supercharge your application, speeding up unconditional home loan acceptance and allowing you to beat out other buyers for the property of your dreams.

Act quick:

The most typical error in obtaining a quick home loan is failing to contact your bank quickly enough.

Even better, if you phone one of our mortgage brokers in the morning to discuss your plans, they may frequently come back to you the same day with an indicative approval.

Soon as you’ve decided on one of our three options, you could receive your pre-approval in as little as one business day (case by case). If you delay until later in the day, especially on a Friday afternoon, you will not receive a reply until at least Monday.

This is necessary if you have already invested your deposit and need to settle quickly, however we always recommend that you obtain pre-approval for a home loan before depositing your deposit.

Save for deposit

A deposit is normally required to acquire a house, but owing to programmes like the First Home Loan Deposit Scheme, you may only need a 5% deposit if you are a first-time buyer, which you need to check with a expert mortgage broker.

But keep in mind that there are additional upfront charges to buying a property, such as stamp duty, legal fees, and pre-purchase pest and building inspections. As a result, you’ll need to save more money on top of your deposit to be able to buy.

Making a savings strategy and adhering to it might help you accomplish your deposit goal.

Get pre-approval

A home loan pre-approval is a non-binding contract from a lender to give you a certain sum of money to purchase a property depending on a brief first assessment. Pre-approval is a simple and quick approach to expedite your final home loan acceptance.

Pre-approvals are essential. Best of all, they are absolutely free, so obtain one as soon as possible before applying for or even beginning your property searching process. This indicates that the majority of the legwork has already been done prior to signing a contract.

Reduce or eliminate other debts

Lenders want to know that you can easily handle house loan repayments, so if you’re currently juggling a number of other obligations, this might be a concern.

Before applying for a house loan, try to pay off – or at least minimise – any outstanding obligations.

When it comes to credit cards, lenders are frequently more concerned with your credit limit than your existing card balance. And besides, you might possibly max out your credit card debt after purchasing a property. Requesting your credit card company to reduce your credit card limit before applying for a home loan might help your application.

Get your mortgage documents ready

Missing paperwork account for about 80% of home loan approval delays!

You may dramatically shorten the time it takes to have a home loan approved by including up-to-date mortgage paperwork with your application all at once.

These documents include:

  • A completed fact find or short application form which is usually provided to you by your bank or mortgage broker.
  • A scanned copy of your drivers licence, Passport/Visa/Citizenship Certificate
  • Your two most recent payslips, or your last two years personal tax returns and financial statements if you are self-employed (low doc options are available).
  • Evidence of savings – usually copies of savings account statements
  • Proof of other assets you own such as a car or investment property, as well as details of any debts you owe.

Applying for a home loan is something most people will only do a handful of times (or less) in their lifetime, so it can seem a confusing process. Expert advice can make it a lot easier. Contact us and we can help ensure your loan application moves seamlessly.

Refinancing: Here are misconceptions you should know

At any moment, you can refinance into a new mortgage agreement. Despite if you have to pay a fee to quit your current agreement early, you could end up saving money in the long run.

You don’t have to borrow more money if you don’t need to, and you might save hundreds or even thousands of dollars every year on your loan repayments.

However, there are several refinancing myths. This article attempts to debunk them and assist you in determining whether it is the correct step for you.

It’s expensive to refinance

The goal of refinancing is to save money, not to spend more. So, unless you significantly increase your debt, you should always notice a decrease in your monthly mortgage repayments.

However, there are always expenses associated with refinancing. That is why it is critical to consider the entire cost of a refinancing agreement, which includes adding these fees to the interest you will pay throughout the period.

Switching to a contract with considerably higher fees may prove to be less expensive than remaining with your existing arrangement, especially if you are paying your lender’s standard variable rate (SVR). Alternatively, you may discover that a loan with a little higher interest rate and fewer fees and penalties is a better fit for you.

Numerous lenders will pay for your legal expenses as well as the cost of having your property appraised. So, if you choose one of these offers, the only price you’ll have to pay is the mortgage arrangement fee.

I should look for the refinance deal with the lowest interest rate

Set-up costs, such as a mortgage arrangement charge which are common when refinancing. As a result, it is critical to consider these fees while shopping for the best mortgage package. Packages with the lowest interest rates sometimes have the highest set-up expenses.

While paying a significant cost to get a lower rate may be worthwhile if you have a large mortgage, if you simply need to borrow a little amount, a mortgage package with a slightly higher interest rate but a lower cost may typically work out to be cheaper overall.

If you are concerned about interest rates rising, you may want to fix your mortgage at a little higher rate instead of refinancing to a tracker agreement, which is now low but may become more expensive in the future.

I can only refinance once my current deal has finished

You have the option to refinance at any time. The trick is to ensure that you will save money by doing so. If you have a fixed rate, a reduced rate, or a tracker deal that is about to expire, you may frequently save money by refinancing three (or in some circumstances up to six) months before it expires – that means you won’t waste time on an uncompetitive SVR.

However, if you have to pay a hefty early repayment fee or penalty to leave your existing arrangement, you will need to locate a much cheaper offer to make it a better total bargain.

Because early repayment penalties usually reduce over time, you could be better off waiting another year to refinance to a better offer. If you’re stuck in a bad contract for a long time, ask your lender if you may pay a lesser early repayment fee to transfer to one of its better options.

I can’t refinance because my financial circumstances have changed

Simply because you are earning less than previously does not exclude you from refinancing. Unless you want to raise the size of your loan, which may be impossible in certain situations, the lender will base your affordability on a lesser amount – and maybe reduce interest rates as well. As a result, even if your household income has decreased, you may be able to refinance to a better offer.

Conversely, if you have just lost your job, you may discover that refinancing is not a possibility at this time. If you’re having trouble making your monthly mortgage payments, talk to your current lender. And if you’re thinking about moving, our “How much can I borrow?” calculator could come in handy.

If you think the time to refinance your mortgage is approaching, contact us and we can ensure this process is quick and worthwhile.

Right things to with financing during Covid-19

The pandemic continues to disrupt our professional lives, our children’s lives, and our financial life. That being said, there is a lot we can do right now: here are some things you can do right away in terms of finance.

Avoid decisions based on fear

We will get through this together, so don’t worry. Emotional situations can lead to bad financial judgments, so seek the support you need while making financial decisions during an urgent situation. Take the time to gather information and guidance about what you want to accomplish.

Find out what financial help is available

The government is taking steps to help the economy, including paid leave and self-isolation, salary subsidies, and business cash flow and tax relief. More information may be found at the official COVID-19 government response website.

Make a crisis money plan

Making a financial plan is extremely crucial during an emergency. Financial difficulties may create significant problems for you and your family, so putting a plan in place can help offer you sense of peace.

  • Consider a scenario in which your income is reduced. To effectively manage your money, you must first determine your incomings and cash outflows.
  • Concentrate on your current “needs” and eliminate any superfluous “desires.”
  • Assign a task to each and every dollar. This implies that you select how your money will be spent and prioritise what is most essential.
  • Put any excess funds you have – even if it’s only $5 or $10 – into a safety nett.

Find out all your options before taking on more debt

If you don’t have emergency savings, consider setting away some money each time you are paid if you can. Based on how the crisis develops, you may find yourself needing to rely on your safety nett sooner than planned.

If you sense you need to borrow more funds to get by, it’s critical that you don’t go for the cheapest option. You may be considering a KiwiSaver withdrawal and applying for ‘significant financial difficulties,’ but you want to be sure it’s the last solution. It’s critical to understand that your KiwiSaver funds can typically be used to cover day-to-day costs but not to pay off debt. Tapping your KiwiSaver is a major decision that will impact your future in some manner, so you want to be sure it’s a good one.

A relatively brief payday loan online or a KiwiSaver emergency withdrawal might spring to mind immediately, but other choices are likely to be more effective: government assistance, short loan or mortgage deferment, or refixing your loan to a lower interest rate with more affordable payments. The aim is to go through with as little debt as possible.

Can’t make repayments? Talk to your lender as early as possible to make arrangements

The sooner you contact your bank or lender, the safer. You might be amazed at how eager they are to collaborate with you and your mortgage. The earlier you contact them, the more equipped they will be to assist you in dealing with finance related stress. And besides, they have to cope with this all the time.

Depending on the circumstances, your bank may: Temporarily halt loan payments. It’s critical to understand that even if your payments are suspended, the interest will continue to accumulate – a loan deferral increases the cost of the debt.

Here are some tips to consider

  • Move you to interest-only payments
  • Restructure business loans
  • Consolidate loans to make repayments more manageable
  • Provide short-term funding
  • Stay safe from COVID-19 scams

Crises tend to bring out the best in everyone, but if you look closely, you may also see the very worst. Frauds and scams involving Covid-19 are proliferating like deadly mushrooms, particularly online, so make careful to double-check every phone call, link, and email you get — it might be a forgery. To ensure that anything is legitimate, make a separate call to a public number when it comes to dealing with funds.

Talk to an expert financial advisor to ensure that any step you take to help your emergency situation does not have many risks involved with it. Contact us and we can help you manage your funds in these difficult times.