Frequently Asked Mortgage Questions (and some useful Videos)
1. Why should I use a Mortgage Broker?
The question is "why not"? But here are the main reasons we think we add can value to arranging your home loan;
- We're free to you (as we are paid by the bank)
- We'll provide all the options to you – not just one bank
- We can give advice on how best to structure your loan, along with how to pay off your loan quicker
- We pride ourselves on providing a rapid, easy to understand and supportive service
- More often than not we can get better interest rates and cash backs through our channels, and because we do it all the time, we know a good deal when we see one
Check out the video to learn more about what we can do for you.
2. What types of Mortgages are there?
There are a range of difference products offered by the banks, and we've picked a few here to give you an idea of those available on the market, but speaking to us about the best type of mortgage for you is really important, as it will save you time and money in the long run.
- Fixed Interest Rates – the interest rate is fixed for a set period of time, between 6 months and five years. This gives certainty around your payments for a longer period of time, and the main advantage is therefore that it will never rise as floating rates can.
- Floating – the interest rate moves with changes in the national money rate and other external factors. This means your repayments will change accordingly, but also gives very good flexibility with making lump sum payments, particularly if your income has a bonus or overtime component.
- Revolving Credit – this is a floating loan that operates like an overdraft. It means you have an account that you can draw a certain amount of money out of, and pay it back any time you like, but you are charged interest on the amount you are in overdraft. Check out our handy guide on Revolving Credits.
Many clients will benefit from having a combination of both of these loans, to capitalise on flexibility and certainty, but others will pay off their loan faster with one or the other.
3. How much will I need for a deposit?
There are a couple of different tiers when talking about deposit.
- Less than 10% deposit – with deposit funds under 10%, the banks get very picky with who they lend to, as well as whacking on a whole load of fees and charge much higher interest rates.
- 10% deposit – The overall offering is better at this level, however there are still some fees involved and usually also a margin on your interest rates.
- 20% deposit – this is where you will be able to obtain the best value in terms of rates, deals and cashbacks.
4. Can family help me into my first home?
Yes, there are ways for parents or friends to contribute part of a deposit, which can help first home buyers over the threshold required for their first purchase. This is often referred to as a "guarantor", and we have ways to structure this to minimise the cost and risk to both yourself and the person who's keen to help. We have put together a blog, which will help provide you some background on how this will work for you. Talk to us if this is something you'd like to explore for your first home purchase.
5. What does it cost?
To use a mortgage broker is free as we are paid by the banks for bringing them business. You get the best of both worlds; great advice and service from someone you can meet and looks at all the options and still the same (and often better) rates, cash backs and access to home loan products that you get from your own bank.
In terms of the cost of having a home loan, interest costs vary depending on the loan type and structure, and these are constantly changing, but we'll be able to recommend the right interest rate and loan structure for your situation. To give you an idea around repayment amounts, we have a really neat tool which will show you payment details based on your loan amount, interest rate and term. This can help with initial budgeting for your new home, and we can take a look at this with you when we meet.
6. What are the costs involved in buying my first home?
The great news is that our services are completely free of charge to you. There are a couple of other professionals you'll need to work with when purchasing, and we've briefly detailed these below to make budgeting easy;
- Laywer – your lawyer or solicitor will manage the property transaction, your Kiwisaver if applicable, the transfer of title, and of funds between yourself and the vendor. They normally charge between $1500 - $1800 depending on the property
- Registered Valuation – This may or may not be required by the bank, and we'll be able to talk you through this, but Registered Valuations cost between $650 - $800 depending on the property, and we can organise these for you.
- Builder's Report – it's a really good idea to get a Builder to have a look at the property before you commit to buying it. They'll be able to tell you if the house is structurally sound, if the cladding is good quality, etc. A builder's report will cost you between $400 - $800.
- LIM Report – A LIM report is ordered through the council and will tell you about any building consents ordered on the property, any changes to the title since it was issued, etc. These are normally between $250 - $500.
You can read about this in some more detail here.
7. What information will I need to provide when applying for a Mortgage?
We aim to make the whole purchase process easy for you, and although there is some paperwork involved in submitting a loan application, we'll minimise this as much as we can for you;
- Our Application Form, which will give us some information about you
- Income evidence, which are normally in the form of payslips, or for self-employed or business owners, your most recent Financial Statements.
- Bank Statements, which show your income coming into your account, and your everyday spending
- Your deposit, which can be made up of your Savings, Kiwisaver, or the Home Start Grant
8. How can I pay off my Mortgage faster?
The best way to do this is to have the best structure in place for your situation, and it's something we deal with a lot when clients who currently own property come to us to re-finance. Having the right loan type, account structure and loan term all impact a great deal on how fast you pay off your mortgage.
Want to know how the process of refinancing works? What deals are our there for you?
Check out the video and you will see how easy this can be and how you can save a lot of money with the right choices. Get in touch with the team and we can discuss options for your situation and how you can pay your mortgage off faster.
9. Which banks have the best rate?
This entirely depends on the individual. Banks have complicated structures, and that's why we're here to wade through the bank paperwork and jargon and present the best deal for you.
We can often also offer better rates than banks who offer workplace discounts or special rates for certain companies. What's important is that we know the best deals, we work with the banks all the time and we can call them out if they aren't up to scratch.
We'll always negotiate you the best rate we can.
10. What if I'd like to build a home?
Building a new home is a really exciting process, although obviously a little longer time-wise than purchasing a home already built. The banks usually have a few extra conditions to tick off, but we have these covered and can guide you through the process from start to finish.
The great news for first home buyers is that some home and land packages are exempt from Reserve Bank rules around lending and the government does contribute more funds towards building your first home via the Home Start Grant.
We have a great easy to understand construction finance guide which will let you know what's normally required and how we can help.
Some Handy Videos to Check Out
Fixing your home loan
On the video to the right you will hear Adam talk about why you should be fixing your home loan and how we can help to do this for you and save you money in the process.
Get in touch with the My Mortgage team about fixing your home home if you would like to discuss this further.
With all of the confusion over Government Valuations/Rating Valuations/Capital Values hopefully this video can clear up what these actually are and how they can be relevant to you when you're buying a property.
Check out the video about Registered Valuations to see why these are more commonly requested by the bank.
Reach out to the team if you would like to discuss further
In this video Adam explains a little bit about Registered Valuations. What they are and why the bank requests you to have one as a part of their loan approval sometimes.
Get in touch with our team if you would like to discuss further
Saving money on short term debt
A lot of people with Home Loan's have short term debt in the form of Vehicle Loan's, Personal Loans, Hire Purchases or Credit Cards. With some smart thinking you can get these debts paid off faster by adding them to your home loan.
An example of this is a client we recently worked with. They had $2500 owing on a Q Card, $3000 on a GE Creditline card and $4500 owing on a credit card.
Although all of these debts started off interest free and the client intended to repay them before the interest free term expired, they remained in place and the average interest rate across those three items was now over 20%!! They were currently making payments of $260 per month on these debts which would see them repaid over 5 years, with a total interest cost of almost $6K!
We arranged for a top up to their existing home loan to consolidate these loans at an interest rate of just over 6% fixed for 3 years. With a small increase in their monthly payments to $300 they will now have this loan repaid in 3 years time and will only pay $1000 in interest.
That's a saving of $5000 and 2 years in repaying the debt.
On top of that we took the time to work out a new budget with the clients so that they will not see themselves fall in to this debt cycle again.
If you would like to discuss options to reduce your overall interest cost and get rid of those small, niggly, debts then contact us or share this with someone who would benefit from our advice.