Buying your first home can be an exciting time. Owning a home is a milestone that many hard working Kiwis aspire to, and we are proud to share our knowledge and service in making your dream a reality.
An experienced mortgage broker can show you all the tricks and tips you’ll need to get started with your first home loan. We work especially hard to get first home buyers started on the property ladder. There are quite a few things to consider so here is a quick summary.
All the banks and other lenders have ‘debt servicing models’ to assess your ability to service (or repay) their loan. The servicing criteria and calculations vary quite widely, so while you may fail with one you may pass with another.
There is no substitute for a personal assessment to see how much you can afford to borrow.
As a rule;
We will need salary and wage earners to demonstrate continuous employment in the same job, or a similar job, for 12 months.
Commission based earnings or bonuses may be discounted in some calculations we do.
We will need business owners and self-employed workers to prove 24 months trading history in order that we can rely on the average earnings for debt servicing calculations.
Your savings will be an important factor in determining what options are available to us.
The majority of banks and non-bank lenders will consider lending up to 90% LVR with some lenders extending to 95% LVR. This means your savings will need to be in the region of 5% to 10% of what you intend buying.
Things to consider
Gifted deposit: The term ‘gifted deposit’ has become fairly common but we prefer to discuss this in terms of “family help with a deposit”. Gifts may be subject to gift duty and gifted deposits could trigger this liability.
Family or other help: Most lenders will accept a long term interest free loan to you (which is normally loaned by family) as being a suitable substitute for saving a deposit. Lenders need to be satisfied that your “family loan” will not incur repayments during its term, and demand for repayment of the family loan cannot be made during its term. Generally, a long term family loan would match the lenders’ loan term (up to 30 years).
Additional security: Family sometimes help in other ways, for example using their property as additional security or topping up their loan – but it is best that we discuss these options if, or when, appropriate.
Asset sales: Sometimes it is just better to downsize the car and get on the property ladder. We understand that this can be a difficult decision, and may not seem economic at the time, but the reality of being in a position to own an asset which appreciates over time (a home) versus owning one which depreciates rapidly (a car) can help the adjustment to selling some assets.
The first thing to do
This is what we will want from you. The following list will apply to most situations. We’ve shown this here to give you an idea of the kind of things we may need, but please don’t treat this as final. We will tailor this to suit your circumstances and the needs of your loan application.
Identification: copy of driver’s licence or passport identification.
Income: evidence of income by way of any one of the following;
a recent payslip (if it shows your annual salary) or your three most recent payslips,
a letter from your employer that confirms your annual salary and your length of employment with the employer, or your work contract
a tax assessment from IRD for the last financial year,
Last 2 years financial accounts prepared by a chartered accountant, if self-employed.
Deposit: evidence of your deposit is usually by way of savings account statements, term deposit certificates, and share certificates and needs to cover a six month period.
Account conduct: evidence of satisfactory account conduct requires three months bank statements from your day to day bank account (where your income is paid to). These statements can be internet statements but they do need to show the running balance after each transaction.