mortgages

What is the First Home Buyers Club and who should come?

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Lance explains how this free coaching workshop will give you the tools and confidence needed for buying your first home.

 

Whenever we do something for the first time—whether it be starting a new sport, public speaking or the first time behind the wheel—it can be daunting to say the least. And buying a house for the first time can bring about that same sort of sweaty palms and self-doubts and sometimes even more so.

 

You have worked hard, schooled and studied, saved money, put money into KiwiSaver, and now, in buying a house, you are expected to do something you have never done before and you’re expected to trust people you have never met. Plus, there is more on the line than ever before when it comes to buying a house and it can have the added pressure of very tight timelines. And then someone comes along and asks you why you are so stressed!

 

Well, here is something I hope will relax you.

 

If you are looking to purchase your first home and if you’re feeling nervous, stressed and maybe a little lost, then I say to you, that is exactly how you should feel! And this is why for the last four years I have run the First Home Buyers workshops.

 

At these evening sessions, I explain how the different banks lend, what they are looking for, how to get a loan and unpack what a pre-approval means. And we bring in some of the best minds in the industry …

 

·      You’ll hear from a real estate agent about what is currently happening in the property market, and how to decide on a price to put on a property.

·      A lawyer will explain what to look out for when it comes time to write down your offer on the dotted line, giving you peace of mind when offering.

·      And often we will have a building inspector to give you the tricks for spotting a warm Wellington home from a cold, damp potential nightmare. 

 

Our hope is that after you have come along to the First Home Buyers Club that you will surprise yourself at how calm and confident you are. That you’ll feel equiped and ready to charge head first into getting your first home.

 

It’s the perfect opportunity to learn from the industry experts, ask those burning questions and chop down what can seem like a mountain of a job into bite-sized, manageable tasks.

 

So, come along! Check us out on Facebook or on our website for upcoming First Home Buyers Club. Dates. And it’s totally free-of-charge! I look forward to meeting you, hearing about your journey so far, and answering your questions.

 

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.

Kylie’s 5 Summer Reno Tips

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Whether the goal is to sell or to dwell, Kylie shares her five top tips for making renovations work for you and for your financial and lifestyle goals.

 

1. Budget

Are you planning on living in your property long term? Before setting a budget, think about your plans. Adding a swimming pool to the family home might not get the return you’re after when it comes time to sell, however, if you’re around for another 20 years it’s can be an investment your family will have time to enjoy.

Consider the re-sale value of your property and your target market if you were to re-sell. Look at what other properties in your neighbourhood are selling for and consider what you paid for yours.

It may be tempting to put an expensive $30,000 designer kitchen in, but not everyone can appreciate the difference between a $15,000 flat-pack kitchen and a designer one. However, doing things on the cheap can be counter-productive, too.

 

2. Keep it simple

Most buyers will be interested in putting their own stamp on the property. So, choose your colours and patterns carefully. Opting for neutral colours and styles is always the safe option.  

 

3. Make a priority list

If you’re not sure where to start, concentrate on things that will improve the comfort of your home, such as insulation and heating.

 

4. Consider your target market

If you are thinking about removing a bedroom to create more space in your dining room, it pays to think about who your target will be if you sell. Will your home be suited to a young family or a retired couple? The ideal number of rooms and the ideal size of the dining room will vary for different buyers.

 

5. DIY or professional?

It may be tempting to take a DIY approach to renovations, but some jobs are best left to the pros. Anything structural or major gas, electrical and plumbing work is best outsourced. Purchasing fixtures and plumbing yourself might not be the cheapest option either, as tradies can usually get trade discounts.

 

Brendon's Bathroom Budget Blowout

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Renovating the home you own rather than buying the house you may not be able to afford is an attractive option right now. But it’s not without its pitfalls … as Brendon found out. 

 

House-price inflation has two impacts that I want to reflect on:

 

1. People who own property feel richer ... because their house is worth more.

 

2. People are opting out of purchasing a nicer home. They are concerned about the cost of the new house, what their new mortgage would be and the risk that their house might now sell and they won’t be able to buy again. (As an aside, we may be able to help with the last one.)

 

So, what do we do when we already own a house but we don’t want to upgrade?

 

We renovate!

 

This can be a good option. Why not get your house into a state you are happy with and actually get to enjoy it—much better than just getting it there a week before you sell it and move out? Of course, the downside is the mortgage gets bigger rather than smaller over time.

 

I found myself in this situation this year and now have two new bathrooms, new carpet, paint and curtains. Yee ha!

 

However, here are some important life lessons learnt along the way:

 

1. Do your figures. Then double them.

 

2. Estimate the time frame. And then double it ... at least.

 

3. Remember all those extra things you might like to get your builder to do. Bigger cavity sliders, recessed shelving in the shower to put your shampoo in, extra lights—it all costs more money and can blow budgets (see 1 and 2).

 

4. When I did my figures, I asked myself, "How much can I get a toilet for? $500?”. Somehow I decided to buy the $1200 one. And, yes, we do need a black flush plate thing to match the black taps (see 1).

 

5. Tradies are busy right now and in to the foreseeable future (see 1 and 2).

 

6. If you are going to stay put for 10 years, design the house how you want to live in. For example, don't put a bath in just because it will “add to resale value” if you or your family aren't “bath” people. In 10 years, your bathroom will be tired and may need another make over anyway.

 

Several lessons learnt, but loving the new bathroom and its colour coordination!

 

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.

 

 

 

Fixed vs Floating: Feeling lucky?

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Brendon reveals the current best rates on the market and suggests that now might be a good time to bet on interest rates staying low.

Assuming you have at least 20 per cent equity and an average-sized loan on an owner-occupied property (note that these things matter when it comes to what interest rate you will be offered) the following are good rates right now:

 

·      1-year fixed rate is 4.3%

·      2-year fixed rate is 4.6%

·      3-year rate is around 5.0%

·      5-year rate is around 5.5%

·      A good floating rate is discounted to around 5.20%.

 

The amount of cash you can expect to receive from the bank as an incentive will vary anywhere from zero to almost one per cent of the loan amount.

We have seen a few drops in interest rates over the last week or so. Lenders are definitely starting to sharpen their pencils on their two-year fixed periods, as well as some of the longer term rates. And we are starting to see some good discounting on particularly strong deals. It looks like banks may be gearing up for their “spring sales”—if there is such a thing in the banking world.

So, what would I do if I was fixing my mortgages right now? 

If I felt like taking a bit of a gamble, I may fix for one year and roll it over year-on-year. I would win this gamble if rates don’t go up too fast over the next few years, as the 1-year rate is the cheapest on the market. To back up this approach, of late, there have been hints that things aren’t going anywhere fast, both locally and internationally, so perhaps it’s not a bad bet.

If, however, I get that wrong, and my budget won’t deal with large potential increases in mortgage costs over the next few years, I would fix for two or even three years and be willing to pay a little more now for that certainty. I would definitely keep some of my loan floating (in lines of credit or offset accounts) to allow me to pay extra down and have the flexibility of re-drawing these funds should I need to.

Additionally, banks are making it increasingly easy to re-fix on line. However, the downside of this is that there is no advice being offered during the re-fixing process.  So if you want some advice around what to do with a home loan that is rolling off a fixed rate, do get in contact with your friendly Velocity adviser.

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.

A recipe for success ... the Velocity way

Dai argues that financial success is much the same as success in the kitchen: follow the steps and the cake is bound to rise.

 

Whether it’s cooking for friends and family or simply throwing something together for myself, from a young age, I’ve always been a keen cook. Even aged 14, I cooked for the entire school camp and that was the start of my cooking journey.

From then, I’ve gone on to work in the hospitality industry and even went on a cooking reality TV show! So why am I talking about food?

Believe it or not, working in finance and, in particular, dealing in the lending space is a bit like cooking and following a recipe. You have to be organised, there may be variables that can affect the outcome, it’s (sometimes) about pleasing others, and, at the end of the day, it’s about doing something that makes you feel good.

I’ve worked in the banking industry for over 10 years, most of it in the retail space. Then I started my own business in the food industry (which I still own), and now I have come back to working in finance again. What I have learnt over the years is that in everything we do, there is a process and system and, like a recipe, it’s there for a reason. It helps keep us on track and, if you follow the recipe correctly (without too much deviation), you can achieve great results where it’s a win/win for everyone.

Like a good recipe, the less steps involved the easier it is to get the desired outcome. Here at Velocity Financial, we have our own recipe for success. It’s a simple four-step process and it goes a little something like this:

 

1. Establish trust

First, we’ll have a chat and arrange a meeting with you. We’ll get an understanding of what makes you tick and what your goals are. We’ll also give you an understanding of what we do and how we work. The main goal at this stage is to establish a connection with you and ensure we are on the same page.

 

2. Needs analysis

Essentially, this is the application process. We will gather information that is relevant to the scope of your application and your financial goals. We identify any risks that you could potentially face and we ensure that all the necessary documents are collated, following up on anything that is missing. It’s also important that you, as the client, provide us with accurate information so we can recommend the right solutions for you. 

 

3. Solution

 We present to you our recommendations and confirm that our recommendations meet your needs. This is also where you can make any changes if needed.

 

4. Help to buy (implementation)

This is the fun part. Now that we have a successful application, we can lock that in and get closer to your financial goal—be it buying your first home, investment property or putting in place some personal protection for you and your family.

Yes, this can be a stressful time, but we work alongside you every step and you’ll also have the help of other professionals such as solicitors, accountants and real estate agents.

So, there you have it. If we get these four steps right then we’re on track for a successful outcome for you (and us).

Velocity Financial have been operating for over 15 years and we have a wealth of knowledge spread amongst our brokers who also come from an array of backgrounds.

The main difference that I see with working for a mortgage brokering company compared to working for a bank is that we can offer more than one solution to our clients. This means that we can speak to several lenders on your behalf and help you get the right results. And like a great recipe, we keep doing what works and we make improvements until we get it right. Trust us, we know what we’re doing.

For further information on how we can help you achieve your financial goals get in touch with any one of our trusted brokers.

 

 

 

 

How "faster" and "easier" can cost you thousands

Twenty-first century banking has arrived, but amidst its speed and efficiency there’s a trap waiting for unsuspecting banking customers.  

 

Here’s my observation: Banks are increasingly trying to make things faster and easier, particularly when it comes to re-fixing your loan or signing up for new products. This of course is awesome if you want to make things fast and easy. It is also a technology-led tsunami that simply won't stop.

 

But here is a question to throw a spanner in the works: Where is the advice?

 

The problem with "Click here to lock in a two-year rate at x.xx per cent ... oh, and if you do it now you can get free fries with that" is that a two-year rate may not be best for you. If rates have dropped should you keep the payments the same?  Have your circumstances changed in the past two years? What are your plans for the next two years? Moving? Kids? New business? The answers to these questions all determine if clicking that button is good for you.

 

Getting good advice can make a huge difference.

 

I had some clients recently who were about to "click the button" when we intervened just in time. They were about to fix for two years, however, their income had doubled since they took out their loan and they had been given $20,000 in an inheritance that was sitting in a savings account.

 

With some quick intervention in their home loan structure they managed to half the length of their mortgage and saved them over $250k in interest over the life of their loan. And it wasn't a big, drawn-out process either.

 

Banks are awesome when they give us money to buy houses and when we need credit cards. However, as consumers, I think we all need to be taking advice before making significant financial decisions.

 

As mortgage (and insurance) advisers our job is to work alongside the banks and give that advice and make recommendations to our clients based on their situation.

 

Before you "click that button" give us a ring.

 

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.

Two Big Shifts in Banks’ Lending

We’ve talked recently about how the banks are tightening the screws of their lending. Here are two recent changes that are creating increasing challenges for borrowers:

 

BANKS ARE CHECKING THE SMALL STUFF

More than ever, banks are going through our applications with a fine-tooth comb. They want to make sure that full-expense budgets have been completed and that these align with bank statements. As an example, we have had deals declined because of two or three unarranged overdraft fees on bank statements.

 

On a similar note, banks want confirmation of where your deposit has come from. So having $30,000 show up in one lump sum into a bank account will raise some questions. The origin of these funds needs to be verified. This has always been the case but our observation is that banks are becoming more particular about these smaller points at the moment.

 

IF IT’S NOT PLAIN VANILLA, THEY’RE NOT INTERESTED

There is no real appetite from banks to do deals that are outside the ordinary—they’re passing up Goody Goody Gum Drops in favour of boring old vanilla.

 

Within banks right now, it seems the credit department is winning over the sales department. They are more concerned about protection and bracing themselves for the uncertainty of the future rather than growing their customers numbers.

 

So, if you are a standard customer with a 20 per cent saved deposit on a good PAYE income, certainly there is no problem getting money. However, if your income is variable, if you are new to business or if the house is out of the ordinary, there are more questions and more challenges being raised by the banks.

 

As always, we will keep you posted with the latest changes. It is our job to stay on top of what the banks are doing so that we are able to provide the best possible advise and mortgage solutions for our clients.

 

Don't hesitate to run your scenario past us if that would be helpful

 

 

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.

What Are The Banks Doing And Why?

Unless you are a financial news junkie (like us), the recent bank changes would have been easy to miss. But there have definitely been changes. Rupert breaks them down for us.

 

Here are just a few of the key changes:

  • One bank won’t lend on a construction project if it is for investment reasons;
  • One bank won’t lend over 70% on any home if you have even one investment property in Auckland;
  • One bank has recently reduced it’s maximum interest-only period to five years (a move other banks made last year);
  • Several banks have raised the rate that they calculate your affordability at (now at the upper seven per cent);
  • One bank has removed the special interest rates if the lending is against an investment property (investment property at this bank will be 0.2-0.5% more expensive than on a personal home);
  • Almost all banks have scaled back on lending to foreign investors.

 

So why are the banks making changes?

 

Remember a month or so ago when the Reserve Bank mentioned that they would look at an Income-to-Debt Ratio? Essentially, you wouldn’t be able to borrow over, for example, five times your annual income. This would be very bad for banks, especially at that lucrative upper crust (the >$2m houses).

 

So the banks’ responses have been to show the Reserve Bank Governor that they have levers that they can pull, other levers, levers that show they are holding back from irresponsible lending without turning the tap off all the way.

 

There will be more changes to follow. The banks will undoubtedly continue to make proactive changes to convince the Reserve Bank to leave them alone. Stay tuned.

 

Rupert 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.

Banks’ New Lending Restrictions—What it Means For You

Banks are in the news. In fact, they are all over the news! But the real question is why? And what does it mean for you? Graham finds out.

 

Firstly, please remember that behind the scenes the Reserve Bank of New Zealand is always policing what the banks do and don't do. It also gives the banks strong suggestions about how lending should look … or else!

 

It is no news to anyone that the Reserve Bank is nervous about the Auckland property market. The changes connected to this nervousness are that if you want to buy an investment property in Auckland you must have a 30 per cent deposit available.

 

ANZ have gone a step further and now say that if you own a property in Auckland ALL your investment properties will be limited to this 70 per cent ‘loan to value ratio regardless of the location of those investment properties. ANZ have also said that to buy any owner-occupied property in Auckland you need 15 per cent deposit whereas other banks are still operating, when they can, on only 10 per cent deposit.

 

Also, all the major banks have now restricted their overseas lending towards non-citizens. Basically, if you are not a citizen or resident of New Zealand you cannot use overseas income to prove your ability to borrow and your borrowing will be limited to 70 per cent of the value of the property.

 

So what does this all mean? 

 

I think that it shows banks are preparing for two things:

1) They want to show the Reserve Bank that they are trying to curb speculative lending—stopping people gambling that property prices will only keep rising.

2) That they are preparing in advance so they don't get caught out, like last time, when the property market does slow down.

 

ANZ is particularly leading the charge in the area of preparing for a potential slow down. They have reduced their enthusiasm for apartments being purchased off the plans and for land purchases, not just in Auckland but throughout the country. Other banks have not followed with similar responses but watch this space.

 

So what should you do?

 

Ring us if you want some clarification. If you are in negotiations directly with the ANZ and have property in Auckland then ring us as well. And … finally … don't speculate on land and apartments.

 

Graham Goodison 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.

3 Steps to Happier Mortgage Applications

 Our days are spent helping our clients either move to a more suitable bank for them or finding the best bank for their new home purchase.

 There are a couple of tips that we’d like to share this month on how to make the mortgage application process much easier.

 

  1. Order your own credit report.  It is free to order your credit report.  It takes approximately 10 days to receive it in the mail or to your email box, however, it’s a very useful bit of information to see how your credit rating is.  We’ve found the best website to start with is here: https://www.govt.nz/browse/consumer-rights-and-complaints/debt-and-credit-records/check-your-own-credit-report/.  You can order your own credit reports or you can set your credit report to turn up automatically every month for a low monthly payment at http://mycreditfile.co.nz. When you come to see us, bring that credit report and we’ll include that as part of the application.  The banks love it when we give them all the information up front! 
  2. Prepare a budget.  The most important thing is to show to the bank how much you earn, how much you spend and, with the remaining amount of money that you have in the month, how much you can afford on the mortgage.  There are a couple of different types of budgets – some just break down your expenses into different categories. We have a version that allows you to break down how much you think you spend and then compare it to last months bank statement.  You can therefore see where the really big spending is occurring.  If you want a copy of our budget sheet, we’re happy to send it out to you.  Please email us to ask us for a copyof the Excel spreadsheet.
  3. Payslips and Financials. If you’re self-employed, we’ll need your most recent financials for your business.  Often, self-employed people haven’t got there financials completed yet.  If it’s past September, then we’ll need the most recent March financials for you.  This bit is unavoidable because the bank needs to know how much you’ve been earning recently. 

If you’re an employee, we’ll need at least 3 recent payslips to get your mortgage underway.  Some payslips are difficult to obtain and you need to request them from your HR departments.  This may take a couple of days, so getting this early makes the process a lot easier.

 

Bonus Tip:  If this is your first home purchase, organising your KiwiSaverwithdrawal early makes the process significantly easier.  It can take between 2-4 weeks to process you KiwiSaver withdrawal form so the earlier you do it, the better.  Here’s a link to the application form: http://www.hnzc.co.nz/about-us/Forms-and-applications/Kiwisaver-application-form/Kiwisaver-application-form

 

If you’ve got any more questions about getting ready for your mortgage application, you’re always free to call one of our advisers.

 

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.