My Money December Update

Reserve Bank orders banks to increase capital by $20 billion

New Zealanders can expect to pay approximately $5 more a fortnight on a $100,000 mortgage as commercial banks are ordered to increase the capital they have in their reserves.That is one of the estimated effects from the Reserve Bank's much-anticipated decision on how much capital banks should hold so they can ride out future financial crises.

"More capital in the banking system better enables banks to weather economic volatility and maintain good, long-term, customer outcomes," says Reserve Bank Governor Adrian Orr.

What does that mean for you?

You need a top adviser in your corner to mitigate these extra costs.
You may not be aware that I am one of a handful of mortgage advisers hand-picked to have access to BNZ Business Partners, Private Banking, Commercial lending and the Professional specialist's team for accountants, lawyers and doctors.

We are well connected and seeing the value of relationships and advice more frequently now. Only last week an accountant called because a client had approached his bank through a mortgage adviser who was a friend with a residential lending background only to be knocked back.

I recently shared a comedy clip from Family Feud and the question was “What do you need to choose carefully in life”  The top four answers were: your spouse, your friends, your house and your banker!

Your rent may be the same as your mortgage payments!

By way of example, if you borrowed $500,000 at just over 3.6% interest (close the average right now) that will mean repayments of about $527 a week. This is also around the average rent being paid in Auckland. 

With tumbling interest rates, first home buyers account for nearly a quarter of all house sales right now, so its good news out there. And it may get even better, with predictions of interest rates going slightly lower again. 

But the challenge is finding the deposit. Last month, I listed ways to bring you closer to achieving the deposit, which can now be as low as 5% of the value of the house. Here is the list again for those who might have missed it or are now in a position to look at it seriously.

Calculate what you could afford based on your current rent

Why all investment houses are not created equal

Many landlords are currently selling sub-standard houses with deferred maintenance. While it may look to be a bargain with an excellent yield, there could well be a reason. The deferred maintenance may be a new roof, plumbing, wiring or other very expensive repairs. As the saying goes, if it looks too god to be true, then it is. I have relationships with companies that can connect you with quality new homes in good locations with great yield. Its worth including these in your search. And if you are new to the investment market, we can help. Check out our investors webinar on how to invest in property from a beginner’s perspective. 

Why use a mortgage broker?

Surely seeing a bank means you can go direct to the source! That’s true, but there are things to be very mindful of before approaching a bank. 

First, if you are declined, it is very hard to re-approach them again. Mortgage advisers match your circumstances to the specific criteria of relevant lenders. This means a far higher chance of success. 

Second, mortgage advisers know what every lender offers and can chase the best possible rate for you. Mortgage advisers also have access to what are called ‘non-bank’ lenders. These are robust institutions that are not well known yet offer great interest rates just the same. Just because “bank” isn’t in their name is not an issue. 

Advisers can also access preferred suppliers for building inspections and renovation quotes and well-priced reputable solicitors. Don’t make the mistake of calling someone you don’t know. 

Added to this, My Money can offer FREE property reports, so you have an idea what a house is really worth. 

A big bonus is that advisers answer their phone after hours and on weekends when you need advice.  If you see a house at an open home in the weekend, phone us! 

And advisers usually do NOT charge for their services. They are paid by the successful lender.