That’s right, a good mortgage adviser will work for you.

There are some key advantages of having an adviser as your own Westpac mortgage manager including:

• Knowing about the products that Westpac offer, and being able to explain in plain English
• Provide advise and help to structure the loans so they suit your situation
• Making sure that the banks are offering you competitive interest rates

Sure, occasionally you might find someone at the bank that appears very pleasant and helpful BUT in many cases they are just doing their job for the bank and making sure that they don’t make things to difficult.

We talk to Westpac customers all the time and in most cases they have had very little (if any) advice and it appears that little thought has gone into the way that the loans have been structured.

Understanding What Westpac Offers

As mentioned, one of the advantages of having an adviser as your Westpac mortgage manager is that they know about the products that Westpac offer, and are able to explain things in plain English.

Westpac have some home loan options that may be better than other banks, but are not often explained.

• Fixed Home Loans (called the Choices Home Loan) – most people will put the majority of their mortgage on a fixed loan and while this is “safer” and “cheaper” it is also generally less flexible. With the Westpac Choices Home Loan you can get the advantages of a fixed home loan but also are able to pay up to 20% above the minimum repayment without being charged a penalty.
• Revolving Credit (called an Everyday Account) – these are great accounts to have as part of a mortgage, but with many banks you cannot have a revolving credit account if you have less than 20% deposit. With Westpac you can as their revolving credit has a reducing limit.
• Offset Account (called Choices Offset) – this is another good type of account, but it’s rarely used as it’s harder to explain how it works. The aim is to “offset” any savings in either your Westpac bank accounts or even ‘say’ your parents Westpac bank accounts against your loan balance. Westpac have a good calculator here that explains how you can save and we can explain how offset home loans work in more detail on our blog.
• Eco Loans (called Greater Choices Home Loan) – this is another option that Westpac have where you can get a loan of up to $50,000 interest free for five years to help you create a warmer, drier, healthier and more energy efficient home or life. This interest free finance is available for a mix of heat pumps, hot water heat pumps, wood burners, insulation, double glazing, ventilation, solar power systems and batteries, rainwater tanks as well as electric and hybrid vehicles, plus electric vehicle chargers (and any associated costs).

This is a sample of what you’re often not told.

Is Westpac Good For First Home Buyers?

Most first home buyers have lower deposits and to help with this Westpac have a few options:

• First Home Loans – using a First Home Loan through Westpac and Kāinga Ora assuming that you are eligible then you only need a 5% deposit. There is a one-off Lenders Mortgage Insurance (LMI) premium of 0.50% that applies instead of a low equity margin (LEM) which means you still get competitive interest rates.
• Family Springboard – this enable’s you to buy your first home with the support from a member of your family (normally a parent) where you have a loan to 80% of your home and a shared loan co-borrowed with your family member in a second shared loan for up to 20% of the value of your home. It’s similar to having a guarantor but limited to the second shared loan only and the family member has no involvement in the main loan. The family support also makes the loan more affordable as you avoid paying a low equity margin (LEM) meaning higher interest rates.

Standard Low Deposit Home Loans – of course Westpac can also offer their standard home loans (mentioned above) for people that have low deposits (under 20%) to a levels set by the Reserve Bank rules, and also home loans for those with more than 20% deposit. If you have less than 20% deposit then you need to be aware of the

Is Westpac Good For Property Investors?

Property investors are limited by Reserve Bank rules to borrowing up to a maximum of 65% on existing homes being used for investment, but new builds are exempt from those rules.

Another way that people often get around this and that enables them to borrow the whole 100% for an investment property is by linking the new lending to another property that you own – maybe your home. There are risks with doing this and in most cases an adviser would suggest that you don’t link your properties, but the banks only have one option and so they almost always will.

• Interest Only Loans – cashflow is important for property investors and so many prefer to start with interest only loans, and then they have the minimum financial commitment but can always pay more as cashflow allows.
• Offset Account (called Choices Offset) – is a great way to use savings to minimise the interest cost, but without having a negative impact on any potential tax deductions. It’s almost the same as paying the loan off, but you retain access to the money as it’s held in a separate account and just offset for the interest calculation.

You want to make smart choices when investing, and it’s another good reason to have an adviser as your Westpac mortgage manager.

Ready To Get Started

The best time to get started is now – not tomorrow or next week.

The sooner that you make contact with an adviser who can act as your Westpac mortgage manager, the sooner you will get to find out your options.

That means you can get started with a Westpac mortgage manager who can review what you currently have and suggest what you should have. One of the best things is that Westpac understand how advisers can help, and therefore pay the advisers to help you – so effectively you get professional advice for free.

We think it’s time that you had your own Westpac mortgage manager.

The post Advantages Of Having A Westpac Mortgage Manager appeared first on Mortgage Managers.

Why is it such a good time?

There are three key things that make it a good time and they include;

1. The favorable LVR rules that exist at the moment – but may not last long
2. The low interest rate environment
3. Ability to get your property investment cashflow positive

In the last 20-years we have never seen an environment where these three things have aligned to offer investors such an opportunity.

Right now investors have an opportunity to restructure their lending to better protect their assets and position themselves to take advantage of future opportunities.

So let’s dig into these key areas in some more detail.

The Favorable LVR Rules

When COVID hit the Reserve Bank relaxed the LVR rules and that meant property investors were able to borrow up to 80% rather than being restricted to 70%.

The Reserve Bank made the changes to the LVR rules to help protect the property market at a time when many economists expected the property values to tumble. They wanted to ensure that as many buyers could enter the market and help hold up the property prices.

This was non a permanent change. The Reserve Bank announced the changes to LVR rules on 30th April 2020 and these are temporary for 12-months will expire on 30th April 2021 unless they decide to extend this.

We now know that the property market has not crashed and in fact in most areas the property market has been very strong and leading economist Tony Alexander now believes the Reserve Bank will reintroduce LVR rules for investors come May next year meaning you will then require 30% deposit again.

The LVR rules are favorable now, but don’t expect that window of opportunity to remain open for too much longer.

Take Advantage Of Low Interest Rates

We are in a time of record low interest rates and there is every chance that they will go lower still.

Nobody is talking of any interest rate increases in the near future.

In the past when mortgage interest rates were over 5% then you needed to search for a property that had a good yield, or you needed to start with a good level of equity (your deposit) to help balance the books. It was hard to find properties in the cities or larger towns that was able to produce a positive cashflow. This forced many property investors to seek out opportunities in the smaller towns.

Now with mortgage rates under 3% is starting to look better. You can now find properties in the cities and larger towns that will provide positive cashflow, and properties in the smaller towns are looking better as investments too.

Low interest rates are meaning that people with money on deposit are also looking for alternative investments.

Focus On Getting Cashflow Positive

Every property investor aims for their portfolio to create a passive income for them.

Of course in normal markets this will take some time and need income (rents) to increase and costs (interest) to reduce. This generally means starting with a property that has negative cashflow, then waiting for rents to increase and at the same time paying the mortgage off to reduce interest costs.

At the moment we have an advantage with both;

1. High demand for rental properties which is seeing rents increase.
2. Record low interest rates and predictions that they could reduce even further and stay low for some time.

This has created a perfect opportunity for investors to accelerate the pace of mortgage reduction and therefore move properties from negative cashflow to positive cashflow.

It’s A Good Time To Restructure Lending

If you are a property investor, or want to start investing then it’s time to review and restructure your lending.

The banks and often even non-bank lenders will almost always insist on cross-collateralisation which is linking all properties as security for lending. As mortgage advisers we have always suggested that this is not a good idea and with the potential changes to the LVR rules you should want to split up your lending now while you still have the opportunity.

You can currently borrow up to 80% on an investment property, but that is expected to reduce to 70% on 30th April 2021.

Even if you don’t need the extra 10% right now, it’s a good idea to have access to that extra equity so you can take advantage of opportunities in the future.

If you have recently borrowed 80% to buy a rental property or have a mortgage on your rental with the same bank (linked to your home) then it’s a good time to restructure lending.

The post Property Investors Know It’s A Good Time To Restructure Lending appeared first on Mortgage Managers.

You need to retain control over your properties and finances, and it’s easy to lose control and options when the bank has linked your properties together.

Of course a bank or a non-bank lender likes to have the control so they can manage things if something goes wrong, but this is to protect the interest of the bank … not your interests.

The key thing to understand is you do have options.

Banks Will Link Your Properties

As advisers we have seen that people can be controlled by their bank and get badly caught out when they sell if they rely on one lender.

It’s something that is not often talked about, but the risks of linking properties is real and should be explained … but rarely is.

Lenders will almost always insist on cross-collateralisation which is linking all properties as security for lending.

They say that this “must happen” but that is just because the banks policy may say this. It doesn’t mean that you have to offer the banks all of your properties for security, and it doesn’t mean that you have to have all of your lending with a single bank.

Banks will link your properties as it gives the bank more control which lowers the risk to the bank.

Financing Properties Together Versus Keeping Separate.

Of course it’s easier to lump your properties and lending together and of course the banks always do this as they have no option.

“Easy” is not a good reason to do anything!

Often when someone wants to sell a property the banks are recalculating the financial position and can ask for proceeds of a sale to be used to pay down debt.

It’s all about ensuring that our clients get the right advice and can retain as much control over their finances as possible.

We cannot predict the future and over the years I’ve seen enough people in sticky situations because the banks (and some lazy brokers) have lumped finances together.

This includes the mortgage on the home, lending on rentals and business lending.

Bank Policy Changes Can Catch You Out

Something as simple as a bank changing their policy can catch you out and cause problems.

We have seen this with the introduction of the loan to value (LVR) restrictions that we imposed by the Reserve Bank a few years ago, and while those have been removed it is important to remember that the changes to LVR made earlier this year are temporary for 12-months from 30th April 2020 and will expire on 30th April 2021 unless the Reserve Bank decide to extend this.

Of course we do not expect that the LVR rules will be reintroduced, but it could happen.

Here is the link to the Reserve Bank announcement: CLICK HERE

This is a valid reason for keeping your investment properties separate and why most good mortgage brokers are suggesting keeping properties separate.

Plus it’s one very good reason to keep rental properties separate from any owner occupied home too.

It Does Happen … LVR Rules Caught Out People

In recent history this same issue caught out a lot of people when they restricted lending on rentals to 70%.

If someone had a home and rental with one bank it might look something like this;

They then want to change the home to say the same value $1,000,000 and in the meantime the rules have changed.

The bank reassess on the new rules (80% LVR on home and 70% LVR on rentals)

Assuming the same values for illustration purposes it would look like this;

This would get worse if you want to spend more or have higher value of rentals.

Situations like this are more common than most people think.

As mortgage advisers we are often contacted by people who have found out that the bank have all their properties tied up together, and this week we have had two separate people with exactly this issue; hence the reason to write this on our finance blog.

Advisers Should Offer The Best Advice

As responsible mortgage advisers the benefits of our clients need to be the top priority.

We need to always recommend that that you do not link your properties, but instead keep your properties with separate banks.

Sometimes it may seem easier to stay with the one bank, and if that is what you choose to do then at the minimum we like to ensure that you are made aware of the risks with lumping them together. Furthermore expect an adviser will also document that they have provided this advice so there is no comeback when things go wrong.

It’s a pity that banks will not be held to the same levels of professionalism; however when they are only able to offer a single product then they are not going to be advising people to go see their opposition regardless what is best for the customer.

Think very carefully and seek advice before letting the bank link your properties.

The post Don’t Let The Banks Link Your Properties appeared first on Mortgage Managers.

Supply Issues With Housing

For the past few years there has been a housing shortage, or what politicians and the media call a “housing crisis” particularly in the big cities like Auckland. This is really a imbalance with housing supply and demand and it is a complex issue to resolve.

When the economy is going well then people want to move back from overseas, or from rural and small town to the cities to be part of it, and with that there is also demand on the housing. This puts pressure on both rents and house prices as demand for housing is outstripping the supply.

The “easy fix” if you believed any marketing logic would be to increase supply, but that is not always as easy as it sounds.

The process of building new houses and apartments can be quite a drawn out process and especially if you are trying to do it to any significant scale. It can take years from the initial planning stage until the new houses or apartments are ready to be lived in. There is the issue of finding the land, planning the development, arranging the development finance, getting the permission to develop the land and build on it, finding and contracting the builders and then finally getting the building done.

KiwiBuild Was The Cure For The Housing Crisis

At the last election the “housing crisis” was turned into a political football.

The National Party had created an economy that was touted as  the “Rock Star Economy” after navigating through the Global Financial Crisis of 2008 and then the devastating Christchurch earthquakes.

They had worked on getting the framework to increase housing development and established the Special Housing Areas (SHA) where property developers could get the consents fast-tracked on the condition that the development had a percentage allocated to affordable housing. In Hobsonville Point they created the popular AXIS Homes which were allocated via a ballot scheme to first home buyers that met a certain criteria. You can read more about AXIS Homes and what homes are still available.

The Labour Party introduced KiwiBuild as the means to fix the housing crisis.

The concept of KiwiBuild was certainly a popular concept for the election with promises of 100,000 affordable houses to be built over 10-years for first home buyers with half of these built in Auckland where the struggle was seen as the hardest. They said that this will fix the housing crisis and due to the scale of the building programme and the use of modern manufacturing techniques the KiwiBuild homes will be affordably priced for new home buyers.

The Labour Party were positive that KiwiBuild was going to work, while the National Party say they are promising a housing plan it knows it can’t deliver.

We have seen KiwiBuild in the media but not all for the right reasons.

How many KiwiBuild Houses have been built? It’s now well over a year since the election and those big promises, although the “start date” for KiwiBuild was  pushed back to July 2018 so really we are just 5-months into the first year. After the election the housing minister Phil Twyford reconfirmed that KiwiBuild would build 100,000 houses but said that in the first year to July 2019 we should only expect 1000 new homes as it will take a while to ramp up production. At this stage Phil Twyford is on record stating that there will be 50 new KiwiBuild homes finished by Christmas so they have a lot to do if they are going to meet the targets that they set themselves.

Are KiwiBuild homes really affordable? The promise was to build affordable houses for first home buyers with half of these built in Auckland. So far not many houses have been built but we have already heard of three developments that have not met the market;

• Five KiwiBuild properties in Onehunga failed to sell via the ballot and were offered to anyone willing to buy them who could qualify for the programme, on a first come, first served basis.
• At Marfell in New Plymouth there are 68 modest KiwiBuild starter homes being marketed for $450,000 yest the area has a median price of $326,000 according to property data provider CoreLogic. This means that the KiwiBuild homes are expected to sell for 38% above the median house prices which makes you question what definition of affordable is being used.
• In Wanaka only 7 of the KiwiBuild homes have sold. The homes are in a subdivision called Northlake and this was the first 10 homes put on the market priced between $565,000 and $650,000. This is a significant development with a total of 211 KiwiBuild homes will be built in the subdivision over the next two years so it makes you wonder what the future of this development is when they are already struggling to sell the new homes.

What is the “real” demand? When the KiwiBuild website went live they asked people to register their interest. We then heard how many people had registered and this was used in the media as an indication of the demand for KiwiBuild Homes; however I questioned the numbers at the time as I had personally registered to ensure that I was kept informed but knowing that I would not qualify as I’m already a home owner – how many others did the same? It was published last week that 46,489 people had signed up to register their interest but only 248 people had been pre-qualified.

It will be interesting to see how KiwiBuild changes and evolves over 2019 because while the concept may seem good, the planning and execution has been poor.

What About The Banks?

As leading Auckland mortgage brokers we always need to keep updated with the various banks criteria and during the past year there have been some very significant changes.

When we say “significant changes” some of them will appear like little changes, but even small changes can be the difference between getting a loan approval or having the application declined. In this last year we have seen a marked increase in the number of mortgage approvals from the smaller New Zealand banks which can be a little more flexible than the big banks, and from the non-bank lenders which have a range of options and are able to offer competitive deals.

For first home buyers the banks are able to still offer some low deposit home loans (under 20% deposit) but are restricted by the LVR rules. Those rules are changing from the 1st January 2019 when the banks are able to do a little more low deposit lending, but they will still be limited in what they can do. As mortgage brokers we have access to a range of banks so when one bank cannot offer a low deposit home loan, another bank quite often can. This is one of the advantages of having choice.

A lot of first home buyers are accessing their KiwiSaver, the HomeStart Grants and help from families to help with the deposits.

There are also the Welcome Home Loans offered by some banks which are targeted for first home buyers but have a number of restrictions including income caps and house price caps which make these difficult in areas like Auckland. Non bank lenders have options to lend over 80% and also allow second mortgages which many first home buyers can consider as an option to get into their first home.

Finance for new builds have been exempt from the LVR rules so should be easier, but the banks all have different criteria and even when there is a house and land package or a fixed price contract the banks will typically be conservative. Building a new home can be one of the most satisfying things but can also be extremely frustrating so it is important to ensure that the finance works with your individual situation and compliments what you are doing with your building project. Given our location and experience we understand new build finance better than most and more importantly can help people understand the processes and potential issues so the build can run more smoothly.

Construction finance is very difficult at the moment and that is one reason that the developers are not building as many houses as everyone had hoped for. Many of the building companies have seen KiwiBuild as a great opportunity for this reason as the banks are still prepared to finance a construction project when they know the Government will be underwriting the purchase of those homes.

Property investment loans have been restricted by the by the LVR rules which meant that you needed a deposit of 35% for investment property, but this is changing to a lower 30% deposit from the 1st January 2019. We expect that this change will see more people get interested in property investment again in 2019; however the Government has highlighted some changes with tax treatment which could be introduced soon which people will need to consider.

You may have heard that the banks are more difficult than they used to be, and they are.

The important thing is to get an experienced mortgage broker working for you as they will know which banks will suit which situation.

The Open Market Is Slow

Talking to real estate agents and when speaking honestly they will tell you that sales have slowed considerably over the past year.

Consultants selling new builds will also tell a similar story and as we are seeing even those selling KiwiBuild homes are struggling to sell new affordable properties which were expected to be so popular that they would be sold using a ballot system.

Initially the market slowed in late 2017 and this was seen as nervousness around the time of the election, and then the market was in limbo for a time as Winston Peter’s went through the process of choosing the new government. We then headed into the Christmas break with the expectation that things would return to normal in the New Year …. but that did not really happen.

We have seen good properties that are well priced still selling well; however with more choice the buyers can be more fussy.

It’s A Buyers Market … But For How Long?

The housing market does suit the buyers more than the sellers at the moment.

With less buyers actively looking the demand is reduced and therefore not as many people looking to buy properties.

In markets like this it is good to be a buyer as you can generally take a little more time to plan your purchase and get to know the local market where you plan to buy. Part of planning your purchase should also include planning your finance and getting pre-approved so you can negotiate a purchase with little or no conditions.

So how long will the market stay like this?

We would love to know but we cannot be sure.

On one hand we have some easing on the LVR rules which may see more buyers in the market and then there are potentially a lot of people that could see pay increases soon. On the other hand we have seen a lot of uncertainty with the economy and some significant price increases which are hitting the household budget hard.

We expect that 2019 may be another interesting year and will probably still favour buyers.

In summary, our housing market update is suggesting it will remain a buyers market for some time yet.

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