first home buyers

Am I Ready to Buy for the First Time? Or Again?

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There is one constant in the ever-changing world of banking: the confusion as to what people can and can’t afford. Lance explores the murky waters of why some banks say yes and some say no.

 

Yeah? Nah.

 

I often find myself sitting with people who believed they were in no position to purchase but could and, conversely, people who believed they could but, at that time, could not. Beyond this, they may have been sabotaging their plans by putting together a strategy that was actually taking them even further away from their house-buying goal.

 

To help clear up some of the confusion, there are really only three things a bank is interested in:

1. Deposit (or equity)

2. Income

3. Debt

 

A scenario I have come across often is when people have strong income, some debt, but a low deposit. They believe their biggest hurdle is the debt, so set about reducing this. The truth is, while they have some debt, their earnings are at a level that the debt is easily managed, even with a mortgage. They need to increase their deposit, but unfortunately all their extra cash is being channelled inefficiently towards debt repayment and, so, unnecessarily delaying their timeframe for purchase.

 

To all those colour-coded Excel spread sheet lovers …

 

There can be times when people have been up all hours looking at properties or going to open homes for months when, unfortunately, they had no ability to purchase at their target price point. This can be frustrating as numbers can be based on correct “true-to-life” calculations. However, banks have their own rules of basic math.

 

When a bank calculates what we can afford to borrow, they use a far higher interest rate (to mitigate fluctuations), and they have a minimum average spend for cost of living for each scenario presented e.g. two adults, one child vs. one adult, no children etc. Furthermore, because each bank perceives risks in different ways, they each calculate a household’s scenario differently. They’ll give greater or less importance to things like the number of vehicles you own and whether child support is organised formally through the IRD, as well as a few other quirks.

 

“If I could turn back time.” — Cher

Time is our gift to you. Tell us your scenario, what you are hoping to do, and when you are hoping to do it. Let us sit down and come up with a clear strategy based on what you are truly able to do.

 

If it is not today, let us help you journey towards that “yes” sooner rather than later. Let’s unpack your plans beyond this next purchase and consider the ramifications of each step. Let’s reduce the uncertainty.

 

Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Hope for First-Home Buyers?

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By Stevie Waring

As the newest member of Velocity Financial (I started with the company in April), I

quickly realised that I was the only person in the office who isn’t a homeowner. I

soon became determined to change that.

My partner and I had talked about home ownership a lot over the past year but

viewed it as something that could only occur in the future—maybe one or two

years away at the earliest.

We watched as the news reported rapid increases in house prices in New

Zealand and Wellington. We were faced with an epidemic. Who were we but

mere mortals? We couldn’t fight an epidemic. So we made peace with the ever

lengthening time between now and home ownership.

Coincidently, I had organised to come along to Lance’s Home Buyers Club that he

runs fortnightly at the office to see what it involved and, just mere days before

this, my partner and I found out that we were getting kicked out of our rental

property and we needed to move again this year.

At the Home Buyers Club it quickly became clear that things weren’t as grim as

we had once thought. There were still houses on the market, in our price range,

and the overdraft we ran into during our first years of university wouldn’t put us

on the bank’s black list after all. What a revelation!

What was to follow in the next four months was like your first relationship: an

emotional rollercoaster filled with checking your emails and TradeMe

obsessively—hoping that cute little three bedroom with insulation likes you as

much as you like it.

I hope our story can bring hope to those with seemingly far off home ownership

dreams. As time continues to go by and your friends and family are telling you

that the next one will be the one, it can be really easy to put pressure on yourself.

However, here are three tips that helped us stay sane and optimistic along the

way:

1. Take a Break

You will not miss out on a once-in-a-lifetime opportunity because you spent one

restful Sunday eating brunch and lying in the sun, I promise.

2. Don’t Shop for a Bargain

They don’t really exist. And hunting for these unicorns just takes up your energy

and time.

3. Make it a Team Sport

Build an amazing team of professionals around you who will reduce your stress

and encourage you to persevere during this process.

How do tiny houses stack up?

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By Stevie Waring

 

Is the tiny house the answer for the struggling first-home buyer? Definitely “yes” for some; definitely “no” for others.

 

In recent years, it has become more and more difficult to be a first-home buyer in New Zealand and renting has become more expensive in many parts of the country.

 

Naturally, many people have come up with alternative solutions. Some students have chosen the “go big” alternative where you live with 10 or more people in the hope of splitting costs. Or you may want a waterfront property without the price tag? Enter the houseboat life. Or you may be a young person, family or couple that wants a home but have no idea how to fund it.

 

This is exactly where the tiny home revolution has taken off. The idea being that you can live a minimalist lifestyle in a carefully designed bespoke small space that is both efficient in space and cost.

 

Apart from the creativity and innovation of it, the biggest bonus of a tiny house is the price. You essentially pay for a standard base plan, and then you pay per room after that. It is totally customisable. It allows you to be creative and unique with your space while giving you the financial freedom to spend your money on higher quality items that may have been unavailable to you with a regular home, such as full insulation, solar panels or beautiful hardwood floors, for example.

 

So how do you pay for it?

 

In Wellington, the average house price is $639,112 (as of June 2018, QV.co.nz) but basic tiny houses are less than $100,000. That’s a no-brainer, right?

 

The short answer is that you can do it, but a bank won’t necessarily give you a mortgage for it.

 

If you see a tiny home in your future, here are a few things to consider:

·         Where will you put it?

o   If you’re planning to buy land, you may be able to use your KiwiSaver.

o   If you have friends or family with some land, it’s probably easiest to put it there.

·         Do you or family have an existing mortgage?

o   If you or your family have existing equity in your property, you may be able to refinance it to access that cash to put towards your new tiny home.

 

Long story short: If you are looking to lead a simpler, more efficient lifestyle that is cheaper in the long-term, then this may well be the solution for you.

 

If you are looking for an alternative to buying a first home because you may not have the funds for a deposit yet, this may not be the solution for you.

 

As with everyone situation, there is often more than one answer, so give us a ring and we can talk through your options—big or small.

Property market watch: The election, winter and a downturn

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With the election and spring fast approaching, change is in the air … or is it? Graham shares what this all means for the property market.

On 23 September 2017, we’ll discover who we can blame for the next three years. It's also the end of winter, the start of daylight savings, and it’s been eight years since 23 September 2009. 

 

So, what do we make of all those things? Well, they all have some part to play in what’s going on with the housing market at the moment, and what’s going to happen in the near future.  

 

Apparently, during every election cycle, Wellingtonians put their plans to buy and sell on hold. It makes sense when you think that the largest Wellington employer, the Government, is in a period of sustained breath-holding while public servants wait to find out who their new boss is. The traditional thought that National makes for a smaller public service and Labour for a larger team obviously impacts public servant’s enthusiasm to change houses and so on.

 

That’s the election, but let’s combine that with winter and the slowdown that comes with sellers wanting to list in spring when there is more sun. And how about we garnish this discussion by adding in a property cycle that traditionally lasts eight years (and yes, it’s exactly eight years since 2009)—and we find ourselves in a perfect storm.   

 

But is any of this true? 

 

Well, on one hand, listings are low but, on the other hand, there are buyers. Well-presented properties continue to sell with good prices, but, at the same time, many buyers remain frustrated. So, much of it becomes a self-fulfilling cycle/prophecy. 

 

It’s certainly a great time to buy; the banks are a little hard work at the moment but most borrowers are being put off by the negative media spin as opposed to banks saying no. If you know someone who is waiting for the great property price slump tell them to wake up. It isn't about to happen. 

 

The lead up to 23 September is certainly going to be a great watch. 

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

How your online info can scare banks away

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We might be connected better than ever thanks to the Internet, but this excess of information isn’t all good news when it comes to finance and property.

 

A quick Google of myself and my home address discovered this about me:

  • Where I last went on holiday
  • The companies of which I am a shareholder and director of
  • My last marathon time
  • A lot about my business and who I work with
  • An estimate of what my house would rent for
  • That I write lots of awesome blog posts(!?)
  • A YouTube video of me
  • A bunch of work photos
  • My estimated house value
  • My neighbour’s estimated house value
  • My credit score

 

There is some helpful stuff here, but also some stark finance-related privacy concerns. Here are a few thoughts …

 

Credit scores

In business and when it comes to trying to get a mortgage or secure credit of any kind (from getting a power account, to renting a home or getting a couch on HP) your credit score matters. Your credit score is something to take seriously and protect carefully. 

 

Here’s my advice: Pay now and argue it later. A clean credit score matters more than a $100 phone bill or gym membership dispute. Furthermore, companies are now reporting to credit agencies if you pay your bills on time. So, if you are considering applying for credit, be sure to keep those bill payments rolling through on time.

 

Where I went on holiday

Mental note, change my privacy settings on Facebook.

 

What my house will sell for

In my work, I deal with lots of real estate agents and from them I have heard some of the dangers of relying on estimates of house prices/values. 

 

Although it is kind of fun to know what your (or your neighbour’s house) is worth, it is a pretty broad estimate, based on comparable sales, that a computer algorithm works out. It is pretty clever, but of course it hasn’t viewed the condition of your property or your neighbour’s or the state of comparable sales or the way your place soaks up the sun or grows mould and so on and so on.

 

These “smart predictors” can lead to false expectations by all parties (buyers and sellers of property), so do take these figures with a grain of salt. And I would make the same comments about the newly launched online rental appraisals that are now popping up.

 

If I can find out the above about me, so can you … and all my clients, colleagues, family and friends. An awesome opportunity and a sobering thought.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

How to Nag Your Mortgage Broker

Hayden Shearman is one of 1000s trying to buy into the Auckland property market. He shares his experiences on how he has made the process more bearable.

 

My wife and I are hoping to become new homeowners. The trouble is that we live in Auckland. Gulp.

 

We’re staring down the barrel of, not only a hefty mortgage with hefty repayments, but also a market that seems to be doing everything it can to keep us out of it. So this is why it’s been so crucial for us to have a Velocity Financial mortgage adviser batting on our team, doing a Brendon McCullum or us, knocking a few sixes and digging out a few swinging yorkers.

 

At the end of last year we teamed up with a Velocity Financial adviser to get pre-approved so we could put our best foot forward when it came to putting down offers and tenders. Over the past few months, while banks have introduce new lending restrictions and property prices have gone up by the minute, our mortgage adviser has guided us through everything from paper work to tender strategies. He’s been crucial to us maintaining sanity and having the courage to keep searching and bidding.

 

To get us rolling, our adviser dealt with an avalanche of complicated accounts from multiple income streams (oh, the joys of being self-employed and having a less than ideal previous 12 months). He had to work with various bank departments (business and personal) to get our application over the line and even fast tracked our preapprovals on several occasions so we were ready to go to auction with the support of our bank.

 

As it’s turned out, we’ve come painfully close in a couple of bids and woefully short in more than I can count. But Velocity has kept us in the game and I’m sure that a window into this rampant property market will pop up for us soon.

 

So, to finish up, I thought I’d share three quick tips that particularly helped us make the most of our Velocity Financial mortgage broker. Some ideas on how you might go about nagging your broker effectively:

 

1) Treat them as your translator: Real estate agents, banks, lawyers—they all have their own language and jargon, it’s okay to ask your mortgage broker to interpret all the legalese.

 

2) Ask questions: If you’re an auction- or tender-virgin like I was, it’s important to have someone you can trust to give you sound advice and equip you with a game plan.

 

3) Use the help videos: Finding all the bank statements and files for a mortgage application can be like pulling teeth. I found the instruction videos for downloading statements for various banks super helpful, especially when you belong to five different banks as I do!

 

Guest blog written by Hayden Shearman, Velocity Financial client.

The False Economies of Relocatable Houses

In today’s runaway housing market, does a relocatable home represent a viable option for first-home buyers? Rupert Gough investigates.

 

I don’t know if you’ve heard, but housing in Auckland has got a tad expensive. 

 

Each week there are many articles touting either the inevitable downfall of property or the infinite despair of the first-home buyer. I know this, because it’s my job to load up our social media accounts with relevant articles and, frankly, it takes no time at all. There are a ton of news articles out there whenever I want them.

 

And then I get this call. 

 

My client has found a section for a reasonable price, about an hour or so north of Auckland, and they’re going to put a relocatable house on it. It’ll cost $400k to build or they can simply buy a house and have it moved there for $150k. Sounds easy, right? So, why isn’t everyone doing this?

 

Most of the problem comes down to a cash flow issue. With a $400k house, the banks can lend you 80 per cent (sometimes even 95 per cent) of the build cost.  That means for a $400k house you might need as little as $20-80k (I’m simplifying here but stay with me). For a $150k relocatable house the bank will not lend you anything until the house is on the land, plugged in and ready to go (with a Compliance Certificate).

 

So why are the banks so reluctant? Because the house isn’t of any value to the bank until it is proven to be compliant. It could have broken on the truck while being relocated or it could have shoddy wiring from 1920 when it was last renovated.

 

So for the $150k relocatable house, you will need $150k cash. By this time, the pro-relos will be screaming at their monitors and saying that the resulting mortgage is much less and, of course, yes, you’re correct (so hang up your pitch forks and delete the angry comments).

 

However, for the majority of people who call me, getting the deposit together is the main hurdle they are facing. That’s why they’ve gone in search of the super cheap housing in the first place—not because they are trying to minimise their total mortgage. So, without a very healthy deposit, you’re just not going to get the bank’s support for that relocated house.

 

So, here is the lesson to take away: Houses, like wine and life-partners, are actually worse for you when they’re unbelievably cheap.

 

Rupert Gough is an Authorised Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

An Update on Wellington Property Prices

 Property prices are on the rise in the capital, but what does this mean for new home buyers? Brendon Ojala investigates.

Right now I'm feeling for all the first home buyers (and actually all the second home buyers) in Wellington. And yes, I can hear those tears also pattering in to the lattes from those a little further north, too. I’m also feeling for those who are wanting to get started on the investment property ladder.

However, taking away the sentimentality, in short, Wellington is a sellers' market right now. It's tough if ou're a first home buyer because there are simply more buyers than sellers in the market.

One of the biggest challenges for first home buyers is that often they have less than 20 per cent deposit. This means that for most banks they will require a valuation before they will approve finance unconditionally.

In a situation where houses are sold via negotiation this isn't such a major issue, as it is generally possible to add valuation as a condition. However, where most houses are being sold by tenders, deadline marketing or auctions, this becomes really challenging for first time buyers given they will be competing with lots of others who are making unconditional cash offers.

If a first home buyer wants to buy at auction and they have a small deposit then there is no option but to get a valuation prior. (I guess they could take the risk by buying the place and hope they can get a satisfactory valuation after auction.)

At a tender or deadline sale there is a decision to be made: spend the money on the valuation (as well as the builders report, etc) and have a cash offer OR make the offer conditional (understanding that is is clear to the seller which is the more attractive offer--which can be a little demoralising when you miss out on your dream homes several times).

It's also tough for people who wanting to upgrade their property. There are big decisions to be made:

  • “Do we sell our existing house, so we're in a stronger position to buy again?” (The challenge here is if one can't find a new property quickly they may be priced out of the market) OR
  • “Do we put offers on property conditional to selling our current house?" (As mentioned above, conditional offers aren't ideal) OR
  •  “Do we work to secure some form of bridging finance?” The latter is a topic for a whole new blog, but certainly where we as mortgage advisers can assist. And in general, a mortgage adviser in a property market like this is a wonderful asset to have on your side. So give us a bell with any questions you might have about getting on to this fast moving Wellington property ladder.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be aken based on the information in this blog alone. A disclosure statement is available free of charge upon request.