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First Home Archives - Mortgage Advisers - Mortgage Lab

Have you ever been to a seminar hoping for lots of useful information and walked away not knowing anything new? What a waste of time!

We are holding a Questions and Answers session with our panel of experts. There will be around 20 people in the room so everyone will get a chance to ask their questions.

Our expert panel includes:

There will be no sales talk; nothing to buy; nothing to sign up to on the night. This is an information night so you can get all your questions answered.

Some topics we’ll most likely cover:

Feel free to come with as many questions as you like. You should leave the session comfortable to move forward with the house-buying process.

Doors open at 6pm. We will get started at 6:15pm. Don’t worry! We have plenty of parking available.

Address:

Century 21
12 Silverdale Street
Silverdale, Auckland

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FAQs

Are there ID or minimum age requirements to enter the event?
No (although you have to be over 18 to buy a house).

What are my transport/parking options for getting to and from the event?
Parking is available all around the venue.

What can I bring into the event?
Bring a pen and paper and all the questions you can imagine.

 

Have you ever been to a seminar hoping for lots of useful information and walked away not knowing anything new?  What a waste of time!

We are holding a Questions and Answers session with our panel of experts.  There will be around 20 people in the room so everyone will get a chance to ask their questions.

Our expert panel includes:

There will be no sales talk; nothing to buy; nothing to sign up to on the night.  This is an information night so you can get all your questions answered.

Some topics we’ll most likely cover:

Feel free to come with as many questions as you like.  You should leave the session comfortable to move forward with the house buying process.

Address:

Harcourts
Level 2
3/2 Te Pumanawa Square, Northwest Shopping Centre
Massey, Auckland

Powered by Eventbrite

FAQs

Are there ID or minimum age requirements to enter the event?
No (although you have to be over 18 to buy a house).

What are my transport/parking options for getting to and from the event?
Parking is available all around the venue.

What can I bring into the event?
Bring a pen and paper and all the questions you can imagine.

 

When you’re looking for an investment property, you are often either looking for capital growth or yield (ideally a positive cash return).  There’s a quick and easy trick that we, at The Mortgage Lab, use to calculate yield on any property we’re looking at.

Calculating Yield

Last month we looked at The Rule of 72 to calculate how long it would take to double the investment.  This month, we look at how to calculate the yield on a property.  You’re going to need the following bits of information:

As an example, a $600,000 property might receive $500 per week rent.

$500 * 52 weeks is $26,000
$26,000 / $600,000 is 0.043 (or 4.3% return).

So this property has a 4.3% (gross) return based on rental income to value alone.

Information from the yield

A 4.3% return would cover some interest rate payments (currently) but won’t cover additional expenses like insurance and rates.  Each individual property requires a different amount of income to get positive cash results.  What we’re looking for is a quick calculation to see how one property compares to another.

A quick calculation of yeild

Let’s say that 5% yield is a decent baseline for yield on a property.  If we’re looking for yield, anything below that is probably not worth investigating any further.  What is a quick calculation to get 5% return?

Well, very approximately:

if weekly rental is 1/1000th of the value of a property, the yield is around 5%

In the example above, the house was worth $600,000.  If the rent had been $600 per week, then:

$600 * 52 weeks is $31,200
$32,000 / $600,000 is 0.052 (or 5.2% return)

The 2 second calculation of yield

So for any property you are looking to purchase, knock the last 3 numbers off and you have the rent required to get to around 5%.  A $750,000 property needs a $750 per week rent.  A $400,000 property needs a $400 per week rent.

Welcome to our First Home Buyers Questions and Answers session.

Have you ever been to a seminar hoping for lots of useful information and walked away not knowing anything new? What a waste of time! Our Q&A session means you get answers to all the questions you have.

Our Panel includes:

There will be no sales talk; nothing to buy; nothing to sign up to on the night. This is an information night so you can get all your questions answered.

Some topics we’ll most likely cover:

Feel free to come with as many questions as you like. You should leave the session comfortable to move forward with the house buying process.

Doors open at 6pm and we will get questions started at 6:15pm. Parking is available in all Financial Design carparks outside. Come along early to grab some nibbles.

Powered by Eventbrite

Have you ever been to a seminar hoping for lots of useful information and walked away not knowing anything new?  What a waste of time!

We are holding a Questions and Answers session with our panel of experts.  There will be around 20 people in the room so everyone will get a chance to ask their questions.

$70 worth of items with your ticket

Early-bird tickets are available in August for $29.95.  For less than $30 you’ll receive:

Our expert panel includes:

There will be no sales talk; nothing to buy; nothing to sign up to on the night.  This is an information night so you can get all your questions answered.

Some topics we’ll most likely cover:

Feel free to come with as many questions as you like.  You should leave the session comfortable to move forward with the house buying process.

Address:

SubUrban
Level 1, 2 Johnsonville Road
Johnsonville, Wellington

Doors open at 6pm and we will get questions started at 6:15pm.  Plenty of parking available.  Come along early to grab some nibbles.

*Note: to receive your free E-Valuer report and book, you must attend the seminar.

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FAQs

Are there ID or minimum age requirements to enter the event?
No (although you have to be over 18 to buy a house).

What are my transport/parking options for getting to and from the event?
Parking is available all around the venue.

What can I bring into the event?
Bring a pen and paper and all the questions you can imagine.

 

Article updated: 16th July 2018

Have you heard about KiwiBuild?  Jacinda Ardern’s Labour government is promoting it’s programme to build 100,000 affordable homes and apartments over the next 10 years.  Here’s what we know so far and our predictions for the KiwiBuild programme.

How to register your interest for KiwiBuild

After checking your eligibility for KiwiBuild, you can complete the form here to register your interest in the KiwiBuild.  There are only a few questions.

Of the 100,000 KiwiBuild dwellings, 50% will be in the Auckland area with the remainder spread throughout the country.  This seems reasonable as the main demand pressure has historically been on Auckland. The government has indicated it will achieve this 100,000 target by utilising crown-owned land and purchasing new homes / apartments directly from developers.  This will be similar to their acquisition of State Housing that has gone on for decades now.  Developers will most likely get priority treatment for the consent process if they agree to selling a percentage of their development at an “affordable” rate. 

What price are the houses going to sell for?

The current indication is that houses will sell for stepped prices in Auckland and Queenstown:

Anywhere else in the country will have a maximum price cap of $500,000.

The now closed SHA Scheme also allowed priority council consent if 10% of any development met the affordable criteria.  In this case, the level determined as affordable was a complicated calculation of the median sales in the area which often ended up as a bizarre number like $541,811.  And it was continuously changing.  It’s great to see the government is going with an easy to remember, round numbers figure this time.

What about income levels?  Do I earn too much?

The maximum income one person can earn is $120,000.  For a couple (or more) the eligibility criteria states $180,000.  We are assuming this will be measured in the same way as the HomeStart Grant.  That is, the previous 12 months must total less than $180,000 (or $120,000).  This is an important distinction from normal applications that take just the current salary.  An applicant could have recently had a raise that pushes them over the limit but because they have earned less than that in the past 12 months, they will still meet the criteria for a limited time.

What other restrictions does KiwiBuild have?

The rules for on-selling the property are looking to tighten.  Currently, to use your KiwiSaver, you just have to commit to living in the property for 6 months.  Until recently, no one was even checking this although lately a dozen or so people have been found to be living elsewhere and received penalties for this.  

With the new KiwiBuild programme, purchasers (or rather, ballot winners) will need to apply to the government in order to sell the property in less than 3 years.  It’s likely the government will only allow this in serious financial cases and will probably take the equity you have made.  In my opinion, this is a great way to tackle the issue.  It’s easy to monitor, and doesn’t force people to continue living in the house under duress as long as they are prepared to walk away from any capital gains.

I think the main problem is going to be finding 100,000 houses in the next 10 years.  Not just finding the land but also finding developers that are prepared to sell part of their project for, what could easily be, below the cost to build.  

Let’s look at the 50,000 new affordable houses and apartments in Auckland.  And let’s imagine every single (!) developer opted to sell 10% of their development under the KiwiBuild programme.  That would mean we need 500,000 new houses and apartments to be built in Auckland in the next 10 years (or 50,000 new dwellings in Auckland per year).  The current all time high for nationwide consents is 40,000 in 1967… Nationwide!  It just doesn’t seem likely that Auckland is suddenly going to go from approximately 9,000 consents in 2016 to 50,000 consents in 2019. 

You can read the Statistics New Zealand report here.

Maybe it’s a stretch goal; which is fine by the way.  And any attempt to get first home buyers into affordable homes is a great goal.  Other feedback from property industry professionals has questioned the ability to find the labour required to complete the KiwiBuild programme.  

At the end of the day, we hope the government can achieve this goal, maybe through some amazing change in council efficiency and vigorous training towards labour.  We’ll certainly be looking forward to helping 100,000 families into new affordable homes!

Now what?

When the ballot opens, you’ll want to have finance approved.  Under the previous Affordable Homes Scheme, pre-approval was a requirement to enter the ballot and we don’t see this programme being any different.

  1. Check your eligibility for KiwiBuild Scheme
  2. Enter your details into the registration form here
  3. Begin the process of getting pre-approved for a mortgage

 

In recent years, the Reserve Bank of New Zealand has implemented a host of rules on the banks, particularly around mortgages.  These rules have several purposes.

Some of them, like the LVR restrictions, are to stop the bubble mania of 2008 from happening again.  The days of lending 100% (or more) on a property are gone and not returning any time soon.

Some of the new rules, like the Responsible Lending Code, should just always have been there.  They require a lender to be able to hand-on-heart say that they were acting responsibly in granting a loan to the client.  Banks are calculating a mortgage at 7.5% to allow for future interest rate rises.  They also assume a 25% vacancy on rental properties which allows for some vacancies and other costs like repairs and maintenance.

These changes most often come up when a mortgage application is in, what I like to call, the “grey zone”.  The clients is just on the edge of what the bank are comfortable with.  Some examples of these grey zone applications are:

At first glance, none of these criteria are dealbreakers but the banks can only take on a certain number of these loans.  They also don’t want to be known for taking on grey zone loans.  If that happens, they end up holding a majority of those loans in the country which is obviously not preferred.

How do the banks decide who to give “grey zone” lending to?

Ask any Mortgage Adviser at the moment how to get a difficult application through the banks, they will answer the same way.  A bank is more willing to lend to an existing customer than bring on a new customer.  They have a lot more information on an existing customer and they are much more able to make informed decisions.

I have accounts with lots of banks.  What constitutes an existing bank customer?

Banks count themselves as “your main bank” if your salary goes into one of their accounts.  I know most of you have just seen a workaround but unfortunately this needs to have been happening for at least 3 months (sometimes 6 months).  Don’t think you can change your salary payment tonight and be an existing client tomorrow.

Couples should use separate banks

It’s therefore a good strategy to have couples, who are looking to buy in the future, put their salary into different banks.  You can still have a joint account but my suggestion is that you put your salaries into completely different banks and then transfer the money into the one account.  Maybe put your personal spending through the different banks to really show that you are an existing customer.

With this strategy, you’ve now got 2 banks who think of you as an existing customer and are likely to be a little more lenient on you if you have to push the limits of their lending policy.  A Mortgage Adviser will still be able to tell you which bank is better to approach first.  Either way, with this strategy, you’ve doubled your odds of a successful outcome.

 

Well, the news is in and we now know a lot more about the eligibility for KiwiBuild.

Income Caps

The maximum income one person can earn is $120,000.  For a couple (or more) the eligibility criteria states $180,000.  We are assuming this will be measured in the same way as the HomeStart Grant.  That is, the previous 12 months must total less than $180,000 (or $120,000).  This is an important distinction.  An applicant could have recently had a raise that pushes them over the limit but because they have earned less than that in the past 12 months, they will still meet the criteria for a limited time.

Owner-Occupied Home

The purchaser must live in the house and “intend to live there for 3 years”.  We can see the wording for this clause being changed to make it more restrictive.  Of course, everyone will say they “intend” to live there.  Potentially, a loss of capital gains would ensure that people didn’t take advantage of this.

Price Caps

If you live in Auckland or Queenstown, there is 3 levels of pricing for houses.

Anywhere else in the country will have a maximum price cap of $500,000.

How to register your interest

After checking your eligibility for KiwiBuild, you can complete the form here to register your interest in the KiwiBuild.  There are only a few questions.

Now what?

When the ballot opens, you’ll want to have finance approved.  Under the previous Affordable Homes Scheme, pre-approval was a requirement to enter the ballot and we don’t see this programme being any different.

  1. Check your eligibility for KiwiBuild Scheme
  2. Enter your details into the registration form here
  3. Begin the process of getting pre-approved for a mortgage

Our thoughts

The government has come up with some interesting solutions to the original problems that KiwiBuild faced.  It has tackled the worker shortage by investigating a migrant visa related to skills in the construction industry and seems to be looking solidly at the prefab construction market to supply the houses.

We remain skeptical regarding the possibility of being able to process the increased number of consents.  One solution to this has been for the government to complete the consents “in-house” taking the pressure off the councils.  This is undeniably a terrible idea.  Although Councils can be slow, they still have the best knowledge on consent processes which are in place for a reason.

At the end of the day, even if this is a stretch-goal and only, for example, 70,000 new houses are created, the first home buyer market will have significantly benefited from the endeavour.  It will also have served to get the pre-fabrication industry more established which will help construction long-term.

Tuesday 22nd May – 5:30pm (Seminar begins 6pm) –

Not sure where to start with your first home purchase? What do you need to prepare? Are you unsure how much you need for a deposit? Or how the HomeStart Grant works?

Join us for our 1 hour seminar with CEO of The Mortgage Lab and author of “The Successful First Home Buyers Guide“, Rupert Gough.

It doesn’t matter if you are about to purchase your first home or you are going to purchase in the next few years. This is the seminar to get you ready.

This seminar will include:

There will also be an opportunity for questions at the end.

Doors open at 5:30pm. The seminar will start at 6pm and take an hour or so with plenty of opportunity to ask questions at the end. Parking is available at Smales Farm.

Note: we will not be selling any products and there is no sales talk. This is an information evening to educate first home buyers through their purchase. We have 2 ticket options – a completely free ticket or a donation to our favourite charity – the “I Have A Dream” Charitable Trust.

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Purchasing your first home can be confusing.  The key to being ready to buy is to be organised.  Here are 3 things that first home buyers can do today to get ready to apply for a mortgage.

Order their Credit Report

Ordering your own credit report is free.  You can a nice and simple indication from Credit Simple or you can get the whole report (I recommend this) from Equifax. This second option can take a couple of weeks (my latest one turned up in 4 days though).  This will allow you to see exactly what the bank is going to see about your history.  If anything isn’t correct, now is the time to address that.

Tidy up your spending

Look through your last 3 months of bank statements.  Are you spending more than you earn or going beyond the limit of your bank account?  This is called going into “unarranged overdraft”.  To a bank, these 2 words send up a big red flag.  Once is usually ok, but more than that and getting a mortgage is going to be difficult.

You can limit how often this happens by setting up a spending account with automatic payments going out.  You’ll know exactly how much is going to be spent and how much is in the account.

Key point: don’t have an eftpos account attached to this expenses account.  You’ll end up over spending and going into overdraft again.

You can download a copy of The Mortgage Lab’s Excel Budgeting Spreadsheet here.

Get proof of your income

The bank is going to want to see your income and it won’t usually be enough to show them the money going into your bank account.  Banks like to see payslips because they show how your income is made up (ie; is it a base salary or commission).  The bank will usually want to see the most recent 3 payslips so if your HR department is a little relaxed in this area, get them working on it now.

If you are self-employed, you will need to have this year’s most recent Financial Statements (between October and March).  You can see our blog on when you need to update your Accounts.  Since Accountants are often busy, these can sometimes take a while to source so talk to your Accountant early.

Bonus Tip

If you’re ready to apply for a mortgage, it’s also time to look at your Life and Health insurance.  You’re going to be signing a contract for a large amount of money and need to make sure you can pay for it.  Find an insurance adviser who you like and feel is looking after your best interests.  We believe the best advisers only advise on insurance which is why we don’t offer it in our company.  They should be comparing several different products and choosing the one that suits you the most.

Summary

You can start getting ready to buy today by: