Buddy, can you spare a million? How easy is it really to get a mortgage in New Zealand?
It’s amazing, really, how many hoops you have to jump through these days just to earn yourself the privilege of borrowing hundreds of thousands dollars in a home loan. But how many hoops are we talking, exactly? How difficult is it in the current market to get yourself a mortgage?
A bit tricky, says Maria Slade, author of Buyer Beware, A New Zealand Home Buyer’s Guide. For starters, you don’t really get past GO without a 20 per cent deposit thanks to the Reserve Bank’s LVR restrictions – although, she says, there are ways around that. “It’s not impossible to to get a loan if you don’t have 20 per cent, it’s just harder and you will pay more for it.”
Some banks will lend up to 85 per cent. “Kiwibank in particular, their focus is on first home buyers, so all things being equal they may lend up to 85 per cent.”
Are you financially ready for a home loan?
But you’ve really got to make yourself mortgage-ready. “You’ve got to have a good financial track record. If you’re popping down to the casino of a Friday and popping out a couple of hundred dollars three times in the evening, the banks will notice that, they will. Believe me, they will go through your accounts and so you need to demonstrate good accounts behaviour.”
The better idea is to get out a couple of hundred at the beginning of the week and buy all your coffees and lunches with that, than it is to be constantly using the eftpos. Also if you’re gearing up to be paying a mortgage, you should work out roughly what your mortgage might be and what it might cost you and put that money aside, so you can demonstrate to the bank that you’re capable of paying it.
“These are all things that the banks are going to want to see because they they’ve got more conservative in the current market environment, and it’s not just to do with the LVR restrictions – the banks are protecting their own position. As we all know, the markets got pretty overcooked and the banks are very aware of that. So you do need to be a good little mortgage payer.”
Don’t overlook other options, though, she says. “Other non bank lenders are an option. You wouldn’t want to do it forever, but if you’re struggling to get that loan, you could go to them for say two to three years. You’ll pay a higher interest rate, but it gets you in and you’re in the property, you’ve got the track record of paying down the mortgage, then you can go to the bank and say ‘look this is where I am, can I get a loan from you?’ and you can get a loan at a better rate, obviously, if you go to a mainstream bank.”
Since the finance company collapses of the last decade, the non-bank lenders have been tainted a bit, “but really they’re reputable and there is a viable option for a lot of people. They say it themselves: ‘you just wouldn’t want to be with us forever. But because we price the risk, we’ll charge you the higher interest rate.’ But that’s another way in.”
Getting some help with your first mortgage
And of course here are the government assistance schemes: “There’s the KiwiSaver Homestart and the Welcome Home loan. They come with all sorts of income and price cap restrictions, and so they’re not easy to get if you’re in the middle of Auckland, because properties are just more expensive than the cap. But in a lot of the regional centres they’re a really viable option.”
Has there been much take-up of these offers? “Yes. The figures show there’s more take up in the smaller centres than there is in Auckland or Wellington, simply because it’s harder get in under the cap.
“But if you’re thinking of buying a house, you want to investigate that and you want to plan ahead for it, really, because you’ve got to have been in KiwiSaver for three years minimum paying consistently over that period, all that sort of stuff. So you want to think ahead and make sure you’re fitting in to the criteria, because it’s a really good option. All these things are options.”
Maria Slade’s new book Buyer Beware, A New Zealand Home Buyer’s Guide, talks about the challenges facing home buyers. Published by Penguin Random House, $30.00 in bookstores or online here.
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