New Zealanders are no strangers to credit cards, but while these cards are a mainstay in many wallets, they can also be a stumbling block on the path to home ownership. Let’s peel back the layers to better understand how credit card usage affects your mortgage potential. The Hidden Price Tag of Credit Cards Credit cards, while convenient, carry a high-interest rate, often around 20% p.a., that can quickly inflate once any interest-free period ends. The concerning part about this is not only the amount you pay in interest but also the effect it can have on your mortgage lending potential. The ..read more

If you’re not in finance, you probably most often hear and see the word “leverage” discussed negatively. News articles about failed investors and companies will no doubt (accurately) list overleverage as one of the reasons for their failure. However, when approached with caution and understanding, leveraged investment can be a powerful tool for growing your wealth. We Kiwis intuitively understand this, as reflected in our love of investment property. Leveraged investment involves using borrowed money or other financial tools to access an investment opportunity and increase the potential return ..read more

Recently we looked at some tips for bidding at an auction.  But what if the house you love is for sale by tender?  Tenders are much less time-pressured than auctions and are often a good way for buyers with less than 20% deposit to purchase a home. Quick tips to stress-free tender purchase The trick to getting an offer accepted is to make it as tasty as possible.  Try and remove any conditions.  If you don’t need a finance clause, don’t put it in (but you’ll need to get the security approved by the bank before you do this though) Everything is negotiable.  The price ..read more

Saving is a long, slow process. That’s why so many of us are so bad at it. You could put $20 aside every week and after a year, you’ll have just over $1,000.  Or you could just buy a few coffees, maybe a smashed avocado on toast, and not be noticeably worse off. After all, what’s $1,000 going to buy you if you live in Auckland? Also, avocados are delicious.  Where you put your money can have some effect on what that $1,000 looks like after a year. In a savings account, at 2% after tax, it’s likely to be around $1,015. For more risky investments, you might get 10% after tax. You’d no ..read more

As you may know from our other blogs, there are some key levels of deposit that you need to get to in order to buy a new home. The main hurdles are a minimum 10% deposit and an ideal 20% deposit. The difference in cost between a 10% deposit and a 20% deposit is significant. Even with a mortgage of $400,000, the difference in cost can be near $10k per annum in the first year and around $4,000 per year every year after that. That adds up! It occurs to some people that borrowing money to get them across the line (whether it’s the 10% or 20% line) is an option. Let’s look at an example of a $500 ..read more

A common phrase in mortgage world is the “one bank trap”. It’s when you have all your lending with one bank which gives the policy makers at the bank all the power and lowers your negotiating power. If the bank’s policy changes, all your investment eggs are in the same basket. But if you spread yourself too thin, you create a different type of nightmare. Let’s use Joe Bloggs as an example. Let’s say he has 5 investment properties with $1.5m of mortgages. For this simple example, let’s say he has no personal debt. How should he spread his mortgages? The One Bank Trap theory says that if all hi ..read more

Good news! You’ve completed your application, handed over a mountain of paperwork (just kidding, our system is paperless) and now you’re pre-approved for your mortgage! After a phone call from your mortgage adviser – our favourite phone call to make, by the way! – you will most likely receive a document via email containing the conditions of your pre-approval. Most commonly referred to as a letter of offer (or LOO). Here are some of the most important parts of the letter: Estimated interest rates It’s now a requirement for financial offers to show how much expected payments will be. In an eff ..read more

One of the simplest ways to grow your deposit is KiwiSaver. Below, we take a quick look at how quickly your deposit could grow and the numbers around this. Let’s say you are earning $50,000 per year on wages / salary. You contribute 3% of your income*, which is $1,500 per year. Your employer also contributes 3% and the government contributes $521 per year. After 3 years and assuming no growth or loss in KiwiSaver, you will have contributed a total of $4,500 and your KiwiSaver balance will be $10,563 thanks to your employers contributions and government contributions. You could also qualify fo ..read more

When you start thinking of owning your first home and considering the steps and challenges involved, it can feel like an impossible goal. There’s no getting around the fact that houses are expensive, and interest rates are high. Given the current conditions and the surrounding media, you might be surprised to hear people from all sorts of backgrounds and situations still achieve home ownership. As well as the couples starting out in their 20s and 30s, we’ve successfully worked with large families on a modest income, solo buyers and people in their 50s. Many of these people didn’t think they co ..read more

This month’s case study looks at a client that found themselves almost at the magical 20% deposit.  Almost… but not quite. Let’s call the couple Bill and Hillary (obviously not their real names!).  Bill and Hillary had their offer accepted on a property at $800,000.  Once their deposit was tallied up, they discovered they had a 19.7% deposit.  This meant they were $2,400 short of the ideal 20% deposit. As our regular readers will know, it is entirely possible to purchase a house with less than 20% but the costs become significantly higher.  Low equity buyers either pay ..read more