Financing your first home

Buying your first home is one of the most important financial decisions you will ever make.

At Mortgage Link we are experienced at helping first home buyers through this process, and at obtaining the mortgage finance that best suits your requirements.

There are three main ways to finance a first home:

1.  Having a deposit

Currently most lenders are requiring a minimum deposit of 20% of the property’s purchase price. Lending with less than a 20% deposit is currently being limited due to restrictions imposed on them by the Reserve Bank of NZ. Lenders will consider loans over 80% however they are very limited in the number they can approve. For loans over 80% the lenders are looking for the following attributes;

·  high income and job stability

·  savings history, good account conduct and a clean credit record

·  low level of existing debt

·  the property being in a large urban area

Borrowing in rural areas and small towns will often require a larger deposit e.g. 20% or greater.

Many first home buyers are accessing their Kiwisaver contributions and using the Kiwisaver HomeStart Grant as their deposit. For more information on this refer to www.kiwisaver-homestart.co.nz

2.  Using the Welcome Home Loan scheme

A Welcome Home Loan (WHL) is a Government sponsored scheme available through selected Banks and Credit Unions. The scheme allows these lenders to lend up to 90% of the purchase price. There are strict criteria under this scheme and the key points are;

·  In this area you can buy a home up to $350,000

·  The maximum income you are allowed to earn is $80,000 p.a. for a single borrower and $120,000 p.a. for two or more borrowers

·  You need to be able to cover your legal fees and other purchase costs as these cannot be added to the loan

There is a great deal of paperwork required before an application for a WHL can be completed. Therefore it is imperative that we help you with this to ensure the information provided with your application is complete and correct, giving you the best chance of an approval.

For more information on this refer to www.welcomehomeloan.co.nz

3.  Having a guarantor

If you do not qualify for the first two options then you can consider a guarantor loan. A guarantor loan is where a family member agrees to stand as guarantor for part of the mortgage required. They also need to offer a property as security to support the guarantee. This option allows for the ability to borrow the entire purchase price, and the possibility of borrowing more to consolidate existing debts and purchase costs.

It is important that the guarantor is in a strong financial situation and fully understands their obligations.

It is usual for the guarantor to be responsible for the portion over 80% of the house price. The guarantor’s obligations cease when

·  the loan is repaid
or

·  the portion of the loan in the guarantors name is able to be refinanced into the main mortgage

An alternative for your guarantor is opting to be a joint borrower and owner. This is where your family member buys the property with you. This has the advantage that the guarantor will have ownership of the property being purchased and the protection that comes with that. The disadvantage of this option is the family member is jointly responsible for the entire loan and not just the portion in excess of 80% of the price of the property being purchased.

Paperwork required

If you are thinking of applying for a mortgage it is important to get organised before you meet your Mortgage Adviser. Here is a list of what information is required:

  1. Your latest 3 payslips if you receive income on which you pay PAYE
  2. Letter from your employer or a copy of your employment contract
  3. Proof of any other income e.g. Working for Families Tax Credits
  4. Your most recent financial statements if you are self-employed
  5. Your last 6 months Bank Statements for the accounts in which your income is deposited
  6. Your last 3 months statements on any other debts that you may have (credit cards, hire purchase accounts, finance company loans etc)
  7. Two forms of photo ID e.g. Passport and/or Drivers Licence

You may be asked for additional information; however providing the abovementioned paperwork will help ensure your loan application proceeds smoothly. Being able to provide this information also demonstrates to your Adviser that you are organised and are managing your finances.

MORTGAGE LINK MANAWATU

PO Box 881, 40 Victoria Avenue, Palmerston North

Phone: 06 358 4006 Fax: 06 358 4007

Email:

Web: www.mortgagelinkmanawatu.co.nz