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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

October's Property Gazette

Published by Scott Miller on Thursday, October 01, 2015 in

Why so much paperwork?

In June 2015 The Credit Contracts and Consumer Finance Amendment Act (commonly known as the Responsible Lending Act) and its code of practice came into force.

All lenders now have to meet the responsible lending obligations outlined in the Act and Responsible Lending Code. This puts New Zealand in line with international best practice but comes with a new set of challenges for lenders and ultimately some extra hoops to jump for borrowers.

So what are the key lender responsibilities?

- Lenders must make reasonable enquiries before entering into a loan or taking a guarantee to ensure that:

a) the credit provided meets the borrower’s needs

b) the borrower can make payments or comply with the guarantee

- Lenders must help borrowers and guarantors to make an informed decision 

- Lenders must treat borrower and guarantors reasonable and ethically, including when breaches occur, when unforeseen hardship is suffered and during a repossession process.

- Lenders must make sure that loans are not oppressive and that they don’t induce borrowers to enter into loans in an oppressive way

- Lenders must make reasonable inquiries to be satisfied the credit-related insurance will meet the borrower’s requirements and the borrower will be able to make payments without undue hardship. 

– Advanced Mortgage Solutions can explain all of these responsibilities and how they affect a borrower

Lenders must meet all other legal obligations – including under the Fair Trading Act and the Consumer Guarantees Act.

To ensure you put the best possible application forward when securing a home loan, always use a mortgage broker. This is what we are trained in, we know the pitfalls, what criteria the banks are using. We are in your corner and work hard to get your application approved.

Contact me today for a no obligation chat about your mortgage requirements.

If you think this article could be of interest to someone else, please feel free to forward it to them.

September's Property Gazette

Published by Scott Miller on Wednesday, September 02, 2015 in
You may have seen plenty of commentary about further interest rate drops in the media over the last few months. There are signals from the Reserve Bank that further drops in the Official Cash Rate (OCR) will be likely towards the end of the year. So what is causing the drop in rates?
 
Slowing of economic growth has been cited as a reason, due to falling dairy prices along with the Christchurch Rebuild appearing to have peaked. Inflation has remained unremarkable at 0.3 percent, which is below the Reserve Banks 1 – 3 percent target. 
 
The Reserve Bank forecast inflation would rise by early 2016 because of the fall in the dollar, though it was unsure how quickly that would flow through into higher prices. The lower dollar will help exporters compete against their foreign rivals but the Reserve Bank believes the currency will fall even further given the weakness in commodity prices.
 
House prices are also pretty static apart from Auckland and certain parts of Christchurch.  The Reserve Bank is introducing measures to curb riskier lending, for Auckland at least the only solution to the rapidly increasing prices is to build more houses.
 
Economists are mixed about how low The Reserve Bank will go, some analysts are picking that the OCR will head back to its record low of 2.5 percent, although we wouldn’t be surprised to see it hit 2 percent by the end of the year.
 
So what does this all mean for your mortgage? Give me a call or reply to this email and I’ll talk you through it.

August's Property Gazette

Published by Scott Miller on Monday, August 03, 2015 in

To break or not to break…

There has been a lot of media attention on interest rates lately, with another cut in the Official Cash Rate to 3.00% people are beginning to question their mortgage decisions, specifically whether or not to break out of their fixed term rates and either float or fix at a lower rate.

Fixed rates are a good way to budget your mortgage however you cannot always make extra payments or pay off your loan without generating a ‘break fee’. It has been very attractive for home owners to fix for longer lengths of time. Fixed rates have been a way to lock in a perceived ‘good’ rate for a longer period of time. Hopefully riding out any increases along the way.

With this continued reduction in rates those on longer 3, 4, 5 year fixed terms are now looking at other options, especially as the floating rate is around the 6% mark which may be less than the older fixed rate.

Although floating rates change depending on the Official Cash Rate (OCR) they are a lot more flexible than a fixed rate. You can pay off more of your mortgage without any financial penalties that would occur on a fixed rate. For instance if you wanted to add an extra $100 per month to your mortgage payments, you can do this on your floating rate and enjoy the interest you will be saving in the long run.

A structured mortgage that has a mix of floating and fixed rates can ride out the interest rate changes. Although you may end up paying a bit more to float your loan, you can still take advantage of the floating loans ability to make extra payments should you wish to pay more off and save in the long-term.

Breaking a fixed mortgage

For those that have signed up for a fixed rate and want to ‘break’ this mortgage to take advantage of the lower rates, you would want to make sure that the savings are substantial enough to warrant the break fee. Banks use a complex formula to work out break fees and I recommend you give us a call to discuss this.

As an illustration Westpac have the following scenarios on their website:

18 months ago John and Mary had a $200,000 home loan with 25 years left in its term, and they signed a contract for a fixed rate of 7% for 3 years. Their regular repayments are $1,414 per month. They now have another 18 months left to run on their fixed rate home loan.

If they break their home loan now the fixed rate break cost will be approximately $14,500.

Scenario 1: Paying off their loan

John and Mary decide to pay off their loan in full because they sell their home, and do not repurchase. The break cost will need to be paid immediately.

Scenario 2: Switching to a lower interest rate

John and Mary decide to break their fixed rate home loan because they want to go to a new lower rate of 18 months at 5.85%. The break cost will need to be paid immediately.

Their monthly regular loan repayment will reduce by $144 per month and they will save approximately $2,592 in interest over the next 18 months.

Scenario 3: Switching to a lower interest rate and adding the break cost to the loan

John and Mary decide to break their fixed rate home loan because they want to go to a new lower rate of 18 months at 5.85%. However they can't afford to pay the break cost upfront, so they decide to increase their loan to cover the cost.

Their monthly loan repayment will reduce by $52 and they will save $936 in interest over the next 18 months. However, at the end of 18 months their loan will be almost $14,500 higher.

The above scenarios are demonstrative examples and do not take into account your personal situation or goals. Every loan transaction differs, so please feel free to contact us to review your specific loan situation.

To see if it is worth breaking your loan please contact us and we can approach the lender to ascertain whether it’s mathematically worth it or not.

 

July's Property Gazette

Published by Scott Miller on Wednesday, July 01, 2015 in

KiwiSaver is only going to become more and more important as time marches on. For many it will soon be their second largest asset after their house.

However, research shows many of us don’t fully understand KiwiSaver and that just under half of all KiwiSaver members are still invested in cash, default and conservative assets which may not be suitable for long term retirement savings.

I have partnered with Generate KiwiSaver, a NZ owned and operated specialist. Generate have provided a simple 4 question survey to help you find out what you know about the key drivers of KiwiSaver. If you would like a no obligation appointment to discuss KiwiSaver simply enter your details at the end of the survey and I will give you a call.

And, for a limited time, if you attend a KiwiSaver appointment with me, you will go in the draw for a $3,000 House of Travel Voucher or one of ten $100 GrabOne Vouchers.

Click here to find out how much you really know about KiwiSaver

or here: http://survey.generatekiwisaver.co.nz/a/AIS02

Good luck!


Commentary by Bernard Hickey

Published by Scott Miller on Wednesday, June 17, 2015 in

June 2015 News - By Bernard Hickey

Welcome to our June Referrer News, continuing on with our series of market commentary from one of New Zealand's top financial journalists, Bernard Hickey.

June was a great month for borrowers and for home owners, particularly in Auckland.
 
The Reserve Bank surprised most economists and at least half the financial markets by cutting the Official Cash Rate (OCR) by 25 basis points to 3.25% on June 11. It also forecast another 25 basis point cut later in the year, with some expecting it as early as July 23 and others seeing a third cut in early 2016.
 
Governor Graeme Wheeler argued the 55% fall in dairy prices and the 60% fall in oil prices in the last year were dragging on demand and inflation in a way he could not have expected last autumn when he put up the OCR by 1% to 3.5%. He denied he had made a mistake last year, saying others had also incorrectly forecast a rebound in inflation.
 
Banks began passing that June 11 cut on in full to their floating mortgage rates almost immediately. By the third week in June banks were cutting their six month to two year mortgage rates by anywhere from 20 to 50 basis points in anticipation of more rate cuts. Some cut their advertised mortgage rates below 5% and there is now a real prospect of the lowest rates for the best customers being closer to 4% than 5% by the end of the year.
 
Inflation for consumer prices remains well below the 2% mid-point of Reserve Bank's 1-3% target range and Governor Wheeler reiterated in his news conference after the bank's June quarter Monetary Policy Statement that he had to focus on meeting his CPI target first, even though he remains concerned about financial stability risks inherent in Auckland's housing boom.
 
Meanwhile, inflation for asset prices in Auckland continued to run rampant and real estate agents reported stellar sales volumes and prices in May. Finance Minister Bill English described it as a "feeding frenzy."
 
REINZ reported that Auckland's median house price rose NZ$30,000 in May to a record high NZ$749,000, while the median price excluding Auckland fell NZ$4,000 to NZ$349,000. Annual inflation in Auckland rose to 19.8% while national inflation excluding Auckland was 2.6% from a year ago.
 
Both REINZ and Barfoot and Thompson reported there were few signs yet that the Reserve Bank's new LVR limit in Auckland for rental property investors and the Government's two year 'bright line' capital gains tax test were having much impact on the market, although they were only announced in mid-May and do not formally apply until October 1.
 
However, there were signs that property investors were spreading out from Auckland. REINZ reported a 40.8% rise in the seasonally adjusted volume of house sales in Waikato/Bay of Plenty in the three months to May from a year ago as the buying started to spread out from Auckland. Auckland volumes rose 27.4% from a year ago.
 
There were also anecdotal reports that some foreign buyers were pulling out of deals to buy apartments off the plan after the Government's announcement they would have to declare their passport and home country tax details when buying properties here.
 
The bottom line
  
Auckland's annual house price inflation rate ran at 15-20% in May, but it was the exception rather than the rule. Wellington prices fell 1.7% and Christchurch fell 3.6% from a year         ago, although Tauranga prices were up 16.5% from a year ago.
Most economists now expect the Reserve Bank to cut the Official Cash Rate by as much as 0.5% to 3% by the end of the year as inflation remains well below the bank's 2%                 target.  Some expect another cut to 2.75% in early 2016.
The Reserve Bank said it was gathering data on house price to income ratios, but downplayed any move to adopt a UK-style 4.5 times multiple, saying it was complex


 
The Team at AMS

June's Property Gazette - Debt Consolidation

Published by Scott Miller on Sunday, May 31, 2015 in

If you find yourself on the wrong side of consumer debt and are paying off credit cards, personal and car loans, store cards. Debt Consolidation may be the right product for you.

At Advanced Mortgage Solutions we have helped countless individuals manage their debt into more achievable payments, saving them thousands in the process.

Debt consolidation enables you to put all of your consumer lending onto your mortgage, pay off the high interest debts and only pay interest at a mortgage rate level, not 19 plus percent. 

A word from the wise, do not consolidate your debt only to keep on spending above your means. This should be used to help you clear the debt, not pave the way for more spending.

Below is a typical example of debt consolidation and the saving in payments that can be made.

Liabilities

Limit

Balance

Weekly Repayment

Mortgage 1

306,000.00

482.66

Mortgage 2

116,000.00

185.74

Total per week on 2 mortgages

 

 

      $668.40

 

 

 

 

Consumer Debt

Personal Loan

24,575.82

163.42

Finance

12,430.39

145.86

Visa

11,500.00

11,390.77

132.69

Q Card

10,000.00

6,457.92

115.38

Mastercard

7,500.00

7,733.54

86.54

GE Money

10,191.06

64.36

Smiths City HP

2,219.13

51.21

Mastercard

3,000.00

2,725.89

34.62

Smiths City HP

2,176.97

50.24

Smiths City HP

2,532.87

58.45

Smiths City HP

833.10

19.23

BNZ Visa

500.00

500.00

5.77

IRD - Income Tax

7,815.25

180.35

Warehouse card

500.00

499.70

5.77

Parents loan

35,000.00

Total per week on consumer debt

 

 

      1113.89

By clearing the consumer debt and adding it to the mortgage, the weekly payment was reduced from $1113.89 to $186.83 per week.  This allowed a saving of just under $1000 per week on original weekly repayment amounts.

If you are struggling with consumer debt and would like to find out how debt consolidation can help, please contact us.

We now have access to BNZ!

Published by Scott Miller on Wednesday, May 13, 2015 in

I am pleased to announce that Advanced Mortgage Solutions are 1 of only 10 broker firms in Christchurch to get full access to BNZ.

As of the 18th of May we will be able to assist with applications for finance for residential, business, or commercial purchases. We will also be able to assist with pricing for any existing BNZ customers who are currently on floating or have a loan about to rollover.

This is an exciting time for all of us at Advanced Mortgage Solutions and we look forward to helping our new and existing customers with options from the BNZ. The addition of BNZ now means we have access to all the main lenders in New Zealand and can tailor make a mortgage structure to suit all requirements.

If you, a family member, or a work colleague need any assistance with a home loan or mortgage please feel free to contact us.

Contact us on 0508 466 356 or by emailing info@advancedmortgagesolutions.co.nz to book an appointment or to workshop a potential deal.

Kind regards

The Advanced mortgage Solutions Team.

May's Property Gazette

Published by Scott Miller on Friday, May 01, 2015 in

Changes for First Time Home Buyers.  

Your family could hold the key to your home

Most lenders are now offering an easier way for first-time home buyers to get on the property ladder. You can leverage off your family members’ home equity to get to the required 20% deposit.

For some time now that banks have required a 20% deposits from first-time buyers, however the deposit doesn’t have to be completely savings based, which is usually a struggle for many young people with rising house prices.

Deposit funds can come from:

·         Savings

·         Gift

·         KiwiSaver

·         First home buyers’ subsidy

·         Equity from a family members’ home.

 

When looking at loan applications banks will also consider the following:

·         Loan affordability

·         Level of existing consumer debt

·         Credit history

·         Age of parents or family member

·         Whether the property used is an owner occupied property or rental

·         Location of the property

 

The beauty of this initiative is that your family does not have to give ‘cash’ up front, they simply use the equity they have in their home to help you get a foot in the door. They are also not required to make a mortgage repayments, that’s up to the First Home Buyer.

So how does it work?

If you want to buy a house that is on the market for $400,000, but you only have $20,000 saved, this house is currently out of reach for you.

However, if your family can help the mortgage can be structured in such a way that you have two separate loans. Your standard home loan and then another loan that is shared with your family, using their equity. See picture below:

Springboard

In the example above I have shown a way of paying the equity part of the loan off at an accelerated rate, in this case over 10 years. If you find that this is too expensive then the repayments can be reduced by paying the equity part over 30 years.

To find out more about how this could help you secure your first home, call us today 0508 466 356.

If you have any friends or family that may be interested in finding out more please either forward them this email or refer them to us and we’ll do the rest.

 

For more detailed information please click here to go through to the Advanced Mortgage Solution Website.

 

If you want to talk to us about how we can help first time home buyers, give us a call on 0508 466 356.

April's Property Gazette

Published by Scott Miller on Wednesday, April 01, 2015 in

As of today (1st April) changes to the KiwiSaver first home buyer packages come into effect. The KiwiSaver First Home Deposit Subsidy has been replaced with a KiwiSaver Home Start Grant. 

Put simply eligible first time homebuyers will now be able to withdraw all of their KiwiSaver savings except the $1,000 kick-start from the government. 

There will also be greater alignment with the KiwiSaver Home Start Grant and Welcome Home Loans for house price caps. The table attached shows the changes.  

 For more detailed information please click here to go through to the Advanced Mortgage Solution Website. 

If you want to talk to us about how we can help first time home buyers, give us a call on 0508 466 356.

March's Property Gazette

Published by Scott Miller on Thursday, March 19, 2015 in

People – there is a war out there! A war on lending.  

You may have seen the headlines SBS bank have a ridiculously low fee of 4.99% fixed for five-years. The advertising was a bit ambiguous, stating that you had to be an existing customer of SBS however, this is not the case. At Advanced Mortgage Brokers we can access this deal for you but we have been told by SBS that this rate will be available for a very limited time. If you would like to take advantage of this rate you will be expected to have your transactional accounts with SBS and place your income into this account.

If you want to talk to us about your options, give us a call sooner rather than later. 0508 466 356. 

Floating Rates to remain static 

We are pleased to see that there is currently no movement towards increasing floating rates this year. BNZ Economist Tony Alexander states: 

“The cash rate is likely to remain at 3.5% all this year thus your floating rate borrowing costs won’t change. Next year is a bit different. We suspect that the Reserve Bank will move the cash rate up from 3.5% to 4.00%. But the risk well worth backing is that they do absolutely nothing so you might see no change in your short-term borrowing costs both this year and next.” 

This is good news but with floating rates the risk is always there that they will rise. If you haven’t looked at the structure of your home loans in a while, feel free to contact us we are always happy to have a look at your setup and advise accordingly. 

Tips on buying your first home 

Advanced Mortgage Solutions with the help of Sorted.org.nz will set out some tips to get you on track for buying your first home. 

There is no getting away from it, you will need to save a deposit to buy your first home. Depending on deposit total (by accessing your savings, KiwiSaver, and the First Home Buyers Subsidy), there are many different options available to first home buyers. 

Generally lenders do require 20% deposit, however there are exceptions to every rule such as the Welcome Home Loan. The Welcome Home Loan only requires 10% deposit and you can get help securing this deposit through KiwiSaver withdrawals or gifted by a relative. There are some rules applicants need to be aware of when trying to use the Welcome Home Loan product, so please don’t hesitate to pick the phone and have a chat with us about the process. 

There are also some positive changes to the Welcome Home Loan product that take effect after the 1st of April. We have a first home buyer’s guide that shows a step by step plan on buying your first home. This along with our experience will see you sail through the minefields of obstacles of buying your first home. 

Get into a habit of budgeting and not only will you get into your home much quicker, you’ll find repaying your home loan and covering all of your outgoings a lot less stressful. We also have a number of existing ways of structuring your home loan, enabling you to pay off your mortgage faster and save thousands of dollars in the process.


Contact us to get free personal mortgage and home loan advice








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