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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.

Property Gazette - April

Published by Scott Miller on Thursday, April 12, 2012 in

           Client News - April 2012

 Welcome to April’s Property Gazette.

This month has seen the completion of Advanced Mortgage Solutions Facebook page. Feel free to have a look around our page by clicking here – please remember to push the “like” button as this helps us get found!


Interest Rate Outlook

We could be excused from feeling like it is a case of “last one out turn out the lights” with the outflow of migration being the highest it has been in NZ since 2001. Yes, there is an outpouring to the perceived ‘lucky country’ in Australia, with some 38,000 leaving our shores last year, however this is offset somewhat by the inflow of 35,000 from other parts of the world, creating only a slight migration deficit - which is nowhere as bad as it may appear.

The outflow of Kiwis to Australia is certainly contributing to the stalling of our economy but the reality is nowhere near as bad as the perception. Of course, one of the things that our Kiwi cousins need to consider is the higher cost of property and living on the other side of the ditch, and while employment opportunities may be more plentiful the cost of getting into property can offset this benefit.

So we have immigration working against us and there is still a focus from Kiwis on deleveraging their balance sheet (or in layman’s terms repaying debt before entering into new purchases) which together with a continued lack of housing stock attributes to holding our growth back.

However, the stock that is hitting the Real Estate market is certainly moving quickly, particularly in Auckland and Christchurch, where average days to sell in both areas is now under 30, which is the lowest in over 2 years.

In relation to interest rates, we continue to enjoy historic lows which are helping with mortgage affordability. There is currently little to no difference between floating and 2 year fixed money and it is only if clients look to fix for longer than 2 years that there is an increase in interest rates carrying a small cost for the extra certainty of a long term fixed rate.

So what to do? It really depends on your personal circumstances, however we do see great value in being able to lock in low-to-mid 5% rates for 2 to 3 years. The only caveat is that you need to be 100% certain that you are not looking to sell your house or make large lump sum principal reductions during the fixed period.

Please contact me to go over your personal circumstances as interest rates have never been lower and are not likely to become lower than they are today.


Authorised v Registered

You may be aware that the financial services industry is now regulated - which is a great thing for you the consumer as it is all about protecting your rights.

There are two categories of Advisers, Authorised & Registered. Essentially, the main difference between the two is that only Authorised Advisers can give you advice in relation to Investment products while both Authorised & Registered Advisers can provide advice in the areas of Mortgages, debt and Insurance.

The most important thing to know is I am fully registered with the Government, (it is illegal to operate and not be registered). To check this out just go to www.fspr.org.nz  and type in Scott Miller. This will quickly confirm that I am able to approach New Zealand lenders on your behalf.


Reduce Payments or Keep Them the Same?

This message is definitely getting through, and more and more of our clients now enlist us to negotiate with their bank on expiry of their fixed interest rate. It is part of our on-going service and costs you absolutely nothing - in fact, the opposite applies in that we are able to negotiate the very best rate for you from your bank.

A question asked of us regularly when a client’s interest rate reduces is “should I reduce my payments or keep them the same?” If you can afford to keep them the same this is definitely a wise thing to do. Let’s look at a simple example to illustrate this.

We have a client with a $200,000.00 mortgage over a 30 year term currently on an interest rate of 6.50%, paying $1264.00 per month. If this rate expires today it is safe to assume we could re-fix in for at least 5.50%. This could drop the payments to $1135.00 per month -or if we kept the payments the same at $1264.00 this would reduce the term from 30 years to just over 24 years and save $51,921.00 in interest – not a bad option for most of us!

As mentioned above please contact me while interest rates are low.


Does a Line of Credit Work?

We are often asked by our clients whether a line of credit loan is a good option for them with their mortgage. Of course the answer is that it does depend on your own set of circumstances.

The main benefit of using a line of credit is that it allows you to run your income through your mortgage (while not losing access to the funds) and because banks calculate interest on a daily balance, any time funds offset your mortgage balance (as an example in the form of your wages) it will save you interest.

Often, the better option is to have only a portion of your mortgage on line of credit, with the balance on a standard principal & interest loan. This provides the flexibility many clients want, the benefit of being able to run your income through your loan, and the ability to enjoy the very sharp fixed rates that are currently available for principal & interest loans.

You are best to talk to me to understand the benefits of a line of credit and whether or not this option is best for your own circumstances.  
   

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