Mortgages

Is a capital gains tax the answer?

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It’s been a favourite topic in the media, but what effect would a universal capital gains tax have on property prices? Graham explores.

 

First things first, let’s clear up that capital gains does exist on rental properties: if you buy and sell within two years you will pay tax on any gain on your rental property.

 

The question is, what would it mean if this same tax was also applied to owner-occupied properties? If it were implemented, will it stop the crazy increases in house prices that New Zealand has experienced?

 

Short answer … I don't know. 

 

There is no evidence from overseas markets that it seems to stop housing inflation. In regard to capital gains on rentals, this is easy to overcome by just buying an additional rental that you effectively put aside as one to sell to pay your tax bill. 

 

The real question for me is how our children will buy property. I think that family assistance for property will become more and more important. First home buyers in Wellington city are certainly paying $700k and up. In five years’ time who knows what they will be paying but I certainly know my kids will be talking to me for some kind of help. Maybe I’ll just them to the opposition as it will be in the very hard basket!

 

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.

 

Fixed vs Floating

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It may seem like groundhog again in the world of interest rates, but Brendon spells out the subtle changes that may influence your fix or float decision.

 

This month’s ANZ market commentary have pointed out that average mortgage rates have nudged a little lower in what we call the belly (two- to three-year rates) of the curve, but retained the familiar tick-shape.

 

So, from a pure “lowest is best” assessment, the one-year rate stands out. Slight movements lower in the two- and three-year rates have improved their breakeven points but not sufficiently for us to move from favouring the one-year rate as the sweet spot.

 

Longer-term rates remain very low by historic standards and offer certainty. The downside is that we struggle to see where inflation is going to come from to necessitate major lifts in the OCR.

 

To summarise all this, rates have dropped a little this month. So, if you want the cheapest rate take the one-year rate. If you want certainty, longer rates are historically still cheap. And ANZ don't see interest rates moving too much in the near future.

 

Whether you should fix or float is still a case-by-case issue. So, we don't believe it’s possible to say to all our clients as a whole, "You should do X." Many of our clients want to pay their loan off quickly, so will put a small amount on some sort of floating rate (be that revolving credit, offset or standard floating) and then fix the majority for some certainty. Others need more certainty than that.

 

As always a conversation with your friendly Velocity adviser can quickly work out a really good strategy designed with you in mind.

 

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.

 

Remember the days of the old school yard

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The property market is much like the school yard; it’s full of bullies, rules, rule enforcers, and of course opportunities for growth and the people to help you grow.

 

My daughter turned five a couple of weeks ago. Awesome, she is now off to school! But what came next I was not prepared for: immense sadness.

 

It was sadness that my baby had taken her first step to independence, pain and concern in being responsible for making her go to a place where she knows absolutely nobody, and the fact that for the next 13 years she will have to raise her hand if she wishes to go to the bathroom.

 

Why did nobody warn me? And where was my fathers-of-five-year-old-girls support group?

 

When I started school I can vividly remember loving it from day one (well, truth is, I cried day one … a lot, but day two onwards was great!). I didn’t occur to me at the time that my parents, also, might have the same sort of concern that I’ve had these past weeks.

 

Anyway, all this reflecting on the virtues and risks of school, got me thinking that the lessons from the school yard transfer well into the property world. So, here are my three top school yard lessons for the home-buyer:

 

#1 - The more you learn, the better things go

If you pay attention in class and do your homework, much of your school experience runs fairly smoothly. It’s the same when looking to purchase property.

 

Those who go in most educated, learn the importance (or lack of importance) that RVs play in your decision-making process, know what to do when something you wish to buy has unconsented work on it, or know who you should consult to make sure your offer actually legally protects you, will come away with a higher chance of success and less chance of falling in to traps.

 

#2 – Find your BFFs

Today (my daughter’s eleventh of school), when dropping my daughter off, three children came up to her and said, “Can we play with you?” Then all four of them ran off and I left watching them running around laughing. I felt comforted in knowing she has a network of support.

 

The idea of purchasing sounds like fun. However, once we’re in the thick of it all, signing on the dotted line and trawling through confusing legalese, there is nothing more comforting knowing that you have team around you, who all place your best interests first. Your Velocity Financial adviser is a key member of that support team. We will keep you informed, we’ll do much of the donkey work for you, and you can contact us and ask your questions, absolutely any question! Let us support you.  

 

#3 - Avoid the headmaster’s office!

If you are in the dreaded headmasters office, things are not going well with your school experience. We can all identify (or have several first-hand experiences!) with this threat of going to see the person at the top, who will tell you off in such a way that makes you wish you still had the comfort of “pull ups” for back up when the fear kicks in.

 

Unfortunately, in the finance world, we have seen people who have found themselves in a world of trouble. Sometimes this is through association, debt from previous partners (“hanging out with the wrong crowd”), or have simply not understood the true ramifications of the decisions they have made (such as tax implications upon sale of a property). Our role in these situations is to sit with you, unpack your situation and help you navigate your way out. We’ll help you understand what will keep you away from walking down that lonely hallway to the naughty chair.

 

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.

 

The desperate first-home buyers’ guide to buying

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Although it can seem like all the doors are being closed to first-home buyers in today’s market, Kylie offers some wonderful workarounds that can get you into your first home.

 

It’s no wonder first-home buyers are feeling the doom and gloom when it comes to stepping on to the property ladder. Most banks require a 20 per cent deposit and the average New Zealand house price is now around $600k (and Auckland $1mil). So, it’s fair to say times are a little tough.

 

However, there are still options out there for those who don’t have a 20 per cent deposit, so don’t give up on saving just yet! Remember, LVR rules aren’t permanent, so what might seem impossible now, might very well be possible in the near-future.

 

In the meantime, let’s have a look at some current options:

 

Build your own home

This is a great option for first-home buyers as you only need a 10 per cent deposit. Plus, if you’re building as a first-home buyer and qualify for the Housing NZ HomeStart Grant, then the grant is effectively doubled to $2000 per year of membership in the scheme (up to $10,000 for five years for each member). (Note: There is a maximum income threshold and also a maximum house price of $550k in the Wellington region.) This means that in most cases a couple would be given $20,000 to put towards their build.

 

Family assistance

There are several ways a family member(s) can help you get into your first home:

 

1)    Gift the deposit (some banks will still require you to have saved at least five per cent of genuine savings).

2)    Allow their house to be used as security. In this case, no deposit is required but you will need to have both good income and credit history.

3)    Purchase the property jointly with another family member.

4)    A family member buys the house as an investment, with the children to live in, and pays the costs. Once equity/credit allows, the children can purchase the property.

 

Welcome Home Loan

The “Welcome Home Loan” is a government-backed loan aimed at getting middle income New Zealanders into their first home without needing a large deposit. Just a 10 per cent deposit is required and this can be gifted. There is a set criteria with maximum house price and income caps, as well as a one per cent fee.

 

Non-banks

There are 90-per-cent lend options with non-banks. This could be an option for those who don’t qualify for the Welcome Home Loan (whether this is due to high income or they are wishing to purchase a property that is higher than the maximum house price cap with Welcome Home loans). However, you will pay a higher interest rate with a non-bank. They will take 80 per cent of the loan and spread the repayments over 30 years, with the remaining 10 per cent on a high interest rate over a term of, say, 10 years. Once you’ve obtained 80 per cent equity in your home you do still have the option to move to a bank.

 

Some banks are doing “live deals” between 80 and 90 per cent for their existing clients. This is dependent on the funding available on the day, and is very limited. There is less certainty around this lending in the current environment.

 

The above is class advice, however if you would like specific property advice please contact one of our Mortgage brokers.  For further information click here for our First Home Buyer’s Guide

 

 

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.

 

 

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.

Fixed vs Floating: What's new, what's old and what to do about it

While the OCR remains unchanged, most interest rates are inching up … what’s going on? Brendon explains.

 

Here is what I have noticed in the last month or so …

 

1. Interest rates have nudged up bit by bit

We are seeing most banks increase their rates by around 0.1% over the majority of their term periods. Although the Official Cash Rate is firmly grounded, these rates are rising because the sources of the banks’ money are rising. Firstly, deposit rates are rising so that banks can attract more deposits, and, secondly, international interest rates (of which banks pay to get some of their money) are also increasing. These increases are being passed on to us, the homeowners.

 

2. There are noticeable differences between banks

The interest rates that banks are willing to offer their clients are varying between banks. For those banks wanting to "grow their mortgage book", there are some good discounts on rates. The banks that are not discounting are either happy with their current mortgage share or their other “banky type ratios” are at their “banky limits” so they have no wiggle room left—they simply aren't interested in competing on rates. 

Given this variation between banks, the old trick of shopping around and going back to the bank with the other banks’ rates isn't having much of an impact, if any.

If the bank is your "main bank"(generally defined by the fact that your salary or wages are going to that bank) then you will get better rates.

 

3. Banks are giving significantly different rates for investment property loans as compared to owner-occupied loans

The reason for this difference is that new regulations make banks hold more capital for different types of loans. Investment property loans are more costly for the bank and they are passing these costs on.

 

4. Interest-only loans are harder to get

Many banks are only allowing interest-only loans on investment property and then are limiting it to say five years tops. At Velocity Financial we currently need to find highly compelling reasons for banks to agree to interest-only loans on owner-occupied property.

 

5. More now than ever, it is hard to say what a good rate is ...  it depends on all of the above

The above points also mean a good strategy is more individualised than ever. As always though, you fix for certainty—the more certainty you want, the longer you fix (but the higher rate you pay)—and the more flexibility you want, the more you have in some form of floating loan account.

If you are in more of a complex situation with multiple properties, working with us, your accountant and your lawyer, to design the best strategy is increasingly important. To fix or float is just the start! Often we will be working with multiple entities with multiple loan products at multiple banks. We don't want to complicate things for the sake of it, but having this set up correctly can enable our clients to get ahead quicker, to be as well protected as possible and to make significant savings.

If you have a simple set up or need a complex configuration we are happy to work with you to ensure your loan structures are well thought out and optimised for today’s climate.

 

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: What's the Best Rate?

With not a lot of movement in the world of interest rates, what terms are looking most appealing? Brendon explores.

 

Since last we wrote, interest rates have, on the whole, been static.

 

A good discounted one-year rate (which is the current "low spot" in the interest rate curve) is 4.45 per cent. So, if you want the cheapest rate, take this. But, be warned, if rates go up then in a year’s time, when you come to re-fix, you will be paying a higher rate.

 

A good three-year (discounted) rate is around 5.0 per cent. If you think rates are going to go up (i.e. the two-year rate being higher than 5.4 per cent in a year’s time) then take the three-year rate. During that three-year period you will be better off on average.

 

If you are going to sell your house in a year’s time take the best one-year rate you can find.

 

If you have $100 surplus cash each week, then make sure some of your loan is floating so you can make the most of this extra cash (it could save you heaps).

 

If you are on two incomes now and are planning to drop to one income in a couple of years’ time, make sure your extra funds are saving you interest now, but can be accessed later on if needed.

 

If you have good income but are terrible with your money, you should increase your mortgage payments to enforce regular saving.

 

And, finally, maybe we should just have a chat to give you some advice around this? Give us a bell.

 

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.

 

 

 

Considering building? Here are your financing options

With our current housing shortage, building your own dream home can look mighty appealing. But what will your bank think and is there any government assistance?

 

If you are considering building there are several financing options available. We’ll get to these shortly, but firstly a note about LVRs and the HomeStart Grant.

 

The Reserve Bank LVR rules don’t apply to those building a new home. This exemption applies to both owner-occupied and residential property investors. So this is a great option for those who don’t have the required 40 per cent deposit for an existing property but wish to add to their property investment portfolio.

 

If you are a first-home buyer and qualify for the Housing NZ HomeStart Grant, then the grant is effectively doubled to $2000 per year of membership in the scheme, of up to $10,000 for five years for each member if you are building.

 

So, all this considered, here are your financing options (and remember that each bank treats construction loans slightly differently): 

 

Fixed-Price Contract

Your builder provides a single, fixed price to complete the build. The contract is “all inclusive”. Mortgage repayments need to be paid while the build is being completed, so if you are renting during this process you’ll need to be able to service both your weekly rent and the mounting repayments on the new build. Banks will generally lend between 80 and 90 per cent on the cost of the project.

 

A Turn-Key Loan (Land and Build Packages)

In this case, the property (land and house) is purchased once completed. A contract is generally entered into before building starts and a deposit paid at this stage. The ownership of the property is transferred from the building developer to you once the house is built.

 

These can be a little more expensive than the fixed-price contract option, however, there are no mortgage repayments required during the build process. Banks will lend up to 90 per cent of the price of a turn-key project.

 

Purchasing Land

In the current market, most banks will lend 80 per cent against a piece of land, assuming it is zoned residential and has the services—power, water, sewerage— available. Most banks will only lend 80% if building will commence on the land within 12 months.

 

Build Yourself

If you are a tradie and are building the home yourself or you are project managing the build, banks will lend between 50 and 80 per cent of the build costs.

 

There you have it. If you’d like to talk through your dream home with us, we might not be so helpful when it comes to choosing curtain patterns but we can certainly help get the cash so you can order the right curtains.

Why I gave up drinking.. (for now)

Friday night drinks at Velocity Financial have become a little cheaper over the last few months for us. Kylie explains why she is swapping her Sauvignon Blanc for a soda water these days.

Three months ago I attended a goal-setting seminar with my daughter. We were asked to list our future goals and to think about what might stop us from achieving them.

My list looked a little like this:

·      Spend more time with my family

·      Eat better

·      Exercise more

·      Start taking better care of myself

 

My list has been like this for as long as I can remember. With three kids and a full-time job, I’ve struggled with finding that perfect balance and, for the longest time, exercise and putting time aside for myself has always been hard. 

 

On these two topics, the word ALCOHOL just kept coming to mind during the goal-setting seminar.

 

Sure, having the time to look after myself was a big factor, however, when I looked back at the months prior to the seminar I realised I had turned down many weekend gym sessions because I was too exhausted. Not only that, I was eating terribly because of the way I was feeling and the alcohol was disrupting my sleep, even just a few glasses. One glass of wine on a Friday night and I was asleep on the couch at 7pm.

 

So I decided I would give up drinking for a little while to see if it made any difference. (Disclaimer - I did not tip my wine down the sink like they have in the photo above - that would be a waste!) 

 

A friend of mine directed me to a Facebook page called “No beers, who cares” see here where participants are encouraged to give up drinking for a year. You’re encouraged to look at why you drink and the social pressures that are placed on you. It’s easy to think a few drinks every now and then is harmless. However, if you are really forced to think about why you need those few drinks you do realise that very few people have a healthy relationship with alcohol.

 

3 months ago I could barely bring myself to put wine in my cooking (less wine for me to drink!) but here I am, eleven weeks in and not a single drop has been consumed.  I’m not sure how much longer I will last, but I’m feeling much better for it … and so is my waistline!

 

If you’d like to come along to Friday drinks at Velocity, just let us know. We’d love to have you along. There will be plenty of non-alcoholic options available! 

 

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.

Fixed vs Floating: Negotiation and Hedging Bets

Interest rates are up on where they were six months ago. So is there still wiggle room for negotiating them down? Brendon explores and gives his fixed vs. float synopsis.

 

A good interest rate very much depends on the deal you have. So to explain what might be a “good interest rate” in today’s climate let’s paint a picture based on averages …

Assuming your loan is of an average size (say $400k) and you have at least 20 per cent deposit/equity then a good floating rate is around five per cent. A good one-year rate is around 4.5 per cent (maybe just under), a good two-year rate is around 4.75 per cent and three-year rate around 5 per cent.

In short, rates are now around 0.5 per cent higher than their low in November 2016.

Plus, right now we are noticing quite significant differences between banks in terms of their willingness to negotiate rates. To be fair, most aren’t negotiating. They are very much in a “protect their asset” mode rather than “grow their book of mortgage” mode.

The cheapest rate is the one-year rate, however, taking this rate will expose you to a higher rate in a year’s time when you’ll need to re-fix. Many of our clients are therefore taking a higher rate but having more certainty for two or three years or even longer.

In most situations, I recommend my clients have at least some flexibility, by putting some of their mortgage on a form of floating rate (be it standard floating, revolving credit or offset) and then having the rest fixed. Some are hedging their bets by having a portion of their debt fixed for a year and the remainder fixed for three years, as an example.

As I always say, everybody’s situation is different. So all the specific factors of your position need to be taken in to account. Getting this sorted for you is part of what your friendly Velocity adviser can help with. So don’t hesitate to ask for our assistance on getting your home loan set up in a way that is best for you.

 

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.

 

Setting up my kids for the future

If we find it challenging to buy a home, imagine what it might be like for our kids. Brendon shares what he’s doing to improve his kids’ home-ownership chances.

 

I have been responsible for bringing two boys into the world and I think my responsibilities don’t end there.

On a philosophical level, two of the key things I believe I need to do as a dad are to, firstly, do all I can to get them through to adulthood with a positive sense of self-regard. And, secondly, I need them to know that I think they are both awesome. The two ideas are, of course, related, but if I have done them then I think I have done okay. Stay tuned for progress reports.

Beyond the philosophical, there are some things on a financial level I want to do in order to set them up. 

I would really like them to be in a position to buy a house in the future (if they actually want to do that is up to them, of course). So the first thing I will do is to encourage them not to live in Auckland!

That aside, they have both been signed up for KiwiSaver. When I set this up they were eligible for the $1000 government kick-start (not available now) so I took that opportunity.

The second, and related, issue is around setting them up with some skills and habits towards working. 

My eldest, who is now 16, works five hours a week with me at Velocity Financial (I often wonder why all my scanned files show up upside down!). This is a little easier for me to organise than for some because I am also the employer. However, I still think this was one of my better moves as a dad. We gave him a formal interview and set him up on our payroll system officially. He has a job description and is accountable for his performance. He is living the dream!

He also contributes to his KiwiSaver. This is part of the home ownership plan.  We are using that to help him save for a deposit.

My youngest is 12 and he has just started a paper run. He is a contractor (hence, why they can get away with paying less than minimum wage and is paid on “weight” of delivery—just in case anyone is interested). The reason this is relevant, however, is that, because he is a contractor, his “employer” doesn’t pay KiwiSaver. So we have set up voluntary payments to his KiwiSaver.

To be fair, $2 per week isn’t going to get him into a house for quite some time. However, at this stage we are concerned about setting up the habits that will get him there.

All our great laid plans aside, it may be that when our boys are ready to buy a house they may still need our (my very patient wife and my) help. So we are working on a debt reduction strategy so we are in a position to do that. Investment property has also been part of our strategy to help get us there.

Let me finish with a quick sales pitch. Yes, at Velocity we can set your kids up for KiwiSaver and can talk debt reduction and financing investment properties. We can also point you in the direction of good lawyers we work with to make sure your affairs are structured in such a way where your kids will be looked after and a way that aligns with the plans you have for them.

Do feel free to get in touch!

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.

 

 

Meet the Team: Dai Phonevillay

 

Dai is the newest member to join us here at Velocity Financial and with her background in banking and finance we are excited to have her on the team. Here's how she came to join the team...

 

Dai was in the process of looking for a full time job and was referred to Velocity by a friend of a friend. She met up with Graham over coffee, and the rest as they say, is history!

 

Dai enjoys the "people" aspect of the business, and believes that fostering good relationships – whether it’s with clients or stakeholders, is the key to success. One of the things that Dai is looking forward to bringing to the team are her skills and experience from the banking industry. In her own words "if I can make a positive difference with how we operate then it’s a win/win for both the company and our clients". We agree!  Dai is also looking forward to working with a great team of people – there’s always laughter in the office and that makes it a fun place to be in.

 

Dai is a mother to a beautiful 4 year old girl who keeps her busy. Dai is also a bit of a “foodie” and runs a food business called 'Taste Lao' where they create delicious South East Asian cooking sauces They are in their second year of business which is exciting!  So whether she is working in the office or in the kitchen, or being an active mum - there’s certainly never a dull moment in Dai's life!