Getting your first or any mortgage can be an exciting and somewhat stressful time. There’s lots of advice out there — but even more adverts from banks with enticing rates, hoping to lure you in!
Unfortunately, these ‘cheap’ rates are not always all they seem to be. For example if you are a first home buyer with less than 20% deposit, the rates you see advertised may not be an accurate reflection on what you will actually end up paying. So trying to choose a lender based on advertised rates alone is not always going to be relevant. If your deposit is less than 20%, many different factors come into play, including how a bank will charge you for being a low equity borrower. It’s likely that with less than 20% deposit, rate discounts will be minimal to non-existent. A low equity fee could also be added to the interest rate you pay, for example, with a 90% loan, some banks may add a .75% margin to the advertised rates.
Even the Welcome Home Loan lenders who offer loans backed by Housing New Zealand can differ in their criteria. Housing New Zealand has basic criteria you need to meet, then the offering bank may also have additional hoops to jump through.
If you are a homebuyer with 20% deposit, comparing banks purely by what you see advertised will also be a risky strategy, as each bank will not always put their best deal in the public domain. Remember, it's not always about the interest rate, it's about which banks’ products suit each borrower's circumstances, how much will a bank lend based on your income, how conservative are they on certain properties, and for investors, should you spread risk and not have one bank holding all your mortgages. A third party such as a mortgage adviser will be able to advise on these points, break it into simple language, and make the process seamless for you to enjoy this experience. Best of all, mortgage brokers are usually a free service.
So before you assume a bank might be best for you based on the rates you see advertised, get some help to delve deeper into the pros and cons of each lender.
Contact us to discuss your options.