Have questions about getting your first home loan. We have put together some common questions that we get asked on day to day basis.
Most certainly not. In fact, getting started on the borrowing process may be the best thing you could do. This allows us to get you a pre-approval towards finding the perfect home, which you can use to assure real estate brokers and sellers that you are a qualified buyer.
Getting pre-qualified for a mortgage will make the process faster and even give you an additional advantage to any purchase offer you make. With this, once you find the perfect home you just need to signed purchase agreement to complete your application.
Home loan process and the length can vary for each person. Pre-approval of home loans are generally issued for 90 days.
You may get pre-approved and purchase a home straight away, while others may get their pre-approvals extended every 90 days until they secure the right home. Finding the perfect home is mostly the hard part but getting the pre-approval done is really the smart and easy way to quicken the process.
It is essential you do not rush until you find the right home as it is a long-term investment, and you want to ensure that it meets all your needs and objectives. We can help you through this process by discussing how the property purchase aligns with your needs and objectives.
How long is a piece of string? It will entirely depend on your income, the part of the country you are in, your assets, your debts, and your credit score. Talking to a mortgage broker will help you determine this beforehand, so when you start browsing for a home you know what exactly to look for.
You could possibly borrow 100% of a property value if you have enough equity in a property already owned by you. You cannot borrow the total value of a property on a standalone basis.
With the Loan-to-value (LVR) restrictions, lenders will lend up to 80% of the total value on owner occupied property and 60% of the total value for investment property.
You could borrow up to 90% on Owner Occupied properties. However Low Equity Premiums are added to the interest costs which could add to the servicing cost of the loans.
First Home Loan Lenders can lend up to 95% of the property value subject to qualifying criteria. Talking to us will help you sort out different options if you do not have enough deposit saved.
Being organized before you meet a mortgage broker is very important to make sure the process is quick and easy. It starts with gathering all your below listed documentation in order:
- Proof of identity – passport or driver’s licence.
- Proof of income – payslips, financial statements, bank statements.
- Statements for Debt and other expenses – any debt like other mortgages, car loans or credit cards.
- Your deposit – KiwiSaver funds, savings and investments, family guarantee.
This ensures that no time is wasted, and you do not miss out on a good opportunity.
To simplify, your credit score indicates your creditworthiness. It indicates how likely and well you are to pay your debts on time. It is numerical value from 0 to 1000, from zero being the worst to 1000 making you a credit unicorn. A good score sits anywhere above 500 and considers all your credit-related transactions, including credit card payments, overdrafts, personal loans, phone contracts, equipment rental, utilities and more.
Your credit score plays a major role when applying for a home loan. It influences whether a lender will approve your loan or not. The lower your credit rating, the less likely it is for a bank to approve your mortgage. It all depends on how well you pay your bills and many factors like late payments, too many credit applications and even your partner defaults on a debt that also has your name on it can impact it.
A bad credit score can be disheartening, but the good news is that you can improve your score over time. Our experts can help you make sure how this can be done so that your future credit score is enhanced and positive.
If you have access to money that is gifted by either your parents or someone else that you wish to use towards your home loan deposit, just know it is possible.
Though it is also true that most banks will want evidence of 5% genuine savings when applying for a home loan. This can be either your accrued savings done by yourself or through sale of an asset belonging to you. When using a cash gift, generally banks will want you to have a gifting certificate.
A gifting certificate is where you get the person gifting the money to sign it and declaring that there is no requirement to repay it. It is better to work things out with a mortgage broker to ensure how this cash gift can be contributed towards the loan.
The good news is that if you are a first home buyer and have been contributing to KiwiSaver for over three years, you may be eligible to withdraw money to help you buy your first home.
If you are eligible you can withdraw: your contributions, your employer’s contributions, the government contribution, interest you have earned, and fee subsidies (if you got these). Although, you cannot use all the funds available as it is compulsory to leave $1,000 in the account. It is a great way to kickstart your first home loan and increase the size of your deposit.
As a first home buyer you are also eligible to get up to $10,000 using the KiwiSaver HomeStart grant. However, you might qualify for this HomeStart grant even if you are not a first-time buyer. Our team has worked with many borrowers who are utilising their KiwiSaver to obtain their first home and we can help you get the most benefits too.
Refix & Refinance
Re-fixing is exploring better options before to lock in a new deal. It is the process of sealing in a new interest rate for a certain period of time to save more money in the long run. We have dealt with many re-fixing applications and understand the ins and out of the market and promise the best rate for your mortgage.
When your current fixed rate term comes to an end, your bank will set a new rate for your loan. This is where taking advantage of new market movements can save you thousands of dollars. Though re-fixing can be done anytime, the best recommended is in between the 60-day period after the term comes to end.
The reason why end of the term is best to re-fix your loan is because you do not need to pay any breaking costs. The 60-day period after the term end gives enough time to analyse the market and decide on the best deal. The fee will vary depending on your current interest rate, loan amount, market conditions and term left in your current agreement. If your mortgage is fixed at a better rate, the interest saved could make the break fee worthwhile and could allow you the opportunity to reduce your loan term if you increase your repayments.
Refinancing is the process of transferring your home loan from one bank to another. When you refinance, you are essentially paying off your existing loan, then taking out a new loan at a different bank.
- Unhappy with the current bank services
- Locking in a more competitive interest rate
- Taking advantage of another bank’s products or services
- Reviewing your loan’s structure
- Being able to borrow a larger amount.
- Redevelopment and / or home makeover
End of your current mortgage term is considered a good time to think about refinancing. It can also be beneficial when your financial circumstances have changed. Perhaps your income has significantly increased, or you are looking to borrow more to buy a new house or an investment property. An often-quoted rule of thumb has said that if mortgage rates are lower than your current rate by 1% or more, it might be a good idea to refinance.