Frequently Asked Questions

Why are fortnightly repayments better?

You may have heard that changing to fortnightly loan repayments is a good idea but are unsure.

The reason is quite simple.

By paying fortnightly repayments instead of monthly repayments you will make an extra monthly payment each year.

This can cut years off your loan which will save you literally thousands of dollars.

With a fortnightly repayment plan, instead of paying your entire mortgage payment once a month, you pay half of the standard amount on a specified date every two weeks and over the course of a year you’ll make 26 half-payments which are equivalent to 13 full payments.

This can seem to many people a lot less painless than increasing your monthly home loan repayments which would in fact have a very similar result with the correct structured home loans.

You can find more information on the benefits of changing to fortnightly loan repayments on this old blog post. READ MORE

You might be surprised how much of a difference just changing to fortnightly repayments can make and is one simple way to pay your home loan off faster. But of you are really serious then you could sign up for a mortgage repayment system like Eat My MortgageCLICK HERE for more about this.

Back to Index

Can I use more than one mortgage broker?

While it is possible to engage more than one mortgage broker, it’s not really going to benefit you and will often cause issues for the mortgage brokers too.

You are always better to work with just one good mortgage broker (or a mortgage broking business) as they should have access to a good range of lenders and can therefore source you the best options.

If you are using more than one broker then they will often submit your application to the same lenders, causing frustration for both the brokers and lenders as the broker has spent time to prepare the applications, they will most likely be presented differently and the lender will only spend time on one application anyway – often the first application received rather than the best prepared.

The same issue occurs when people go straight to the banks. The bank staff are likely to have presented differently and if declined it takes a lot of extra effort for the mortgage broker to get the bank to overturn their decision and approve the application.

It is also important to understand that most mortgage brokers only get paid on success, and therefore will most likely prioritise those people who work with them exclusively.

As professional mortgage brokers the team at Mortgage Managers will only work exclusively.

 

Back to Index

What is a low equity margin?

In New Zealand the banks will normally charge a low equity margin on home loans where there is less than 20% equity or deposit.

A low equity margin (LEM) s is basically a higher interest rate charged on your home loan because the banks see lending of more than 80% as a higher risk and there are additional funding costs to the banks. The banks charge a higher interest rate to cover the deemed extra risk and to offset the higher bank funding costs associated with lending with low deposits.

The banks generally scale the margin charged depending on the LVR (loan-to-value-ratio) on your home loan.

Unfortunately this affects first home buyers mostly … often the people that that need to save every dollar that they can!

When people source loans directly from a bank then they will generally just accept what the bank will offer them, often just accepting that this is what they have to pay.

However as professional mortgage advisers we research things like low equity margins so we can offer people good advice and better choices.

You can read more about low equity margins on this website too. READ MORE HERE

You can find a mortgage broker here too.

Back to Index

Can I get mortgage with bad credit?

As mortgage brokers we have become known throughout New Zealand for helping people get mortgages with bad credit?

So the answer is YES, you can often get a mortgage with bad credit.

There are some banks and a number of non bank lenders that will provide home loans for people that have bad credit, but you want to deal with an experienced mortgage broker to ensure that you are given the best chance of success and ultimately the best deal.

You can read about successes on our non bank broker blog; READ MORE

Back to Index

What is second tier lending?

People often ask what is second tier lending?

Essentially, second-tier lending are non bank loans to help buyers secure a mortgage when the banks may say “NO”.

There are various reasons why a borrower may not be able to get a mortgage with a bank and is therefore willing to accept lending from another organisation. It may be that the borrower has a lower deposit than the bank requires, the borrower may not be able to “prove” their incomes to satisfy the bank, there may be some poor account conduct or bad credit or the borrower may fall outside of bank criteria for another reason.

The non bank lenders are known as second tier as they are generally more expensive and therefore the second choice; however there are times that some borrowers will prefer them to a bank.

Some mortgage brokers are very experienced as non bank brokers.

 

Back to Index

Should I split my home loan?

In most cases it is recommended to split your home loan.

There are two key reasons;

  1. It gives you better flexibility if you are wanting to pay your mortgage off faster and is the loan structure that most of the mortgage reduction systems utilise.
  2. It spreads the risk across two or more loans and fixed rate loan terms so that if interest rates were to rise the impact is cushioned to reduce the immediate financial impact.

Your mortgage professional can explain this in more detail.

 

Back to Index

What is the current home loan interest rate?

As mortgage brokers we are always following home loan interest rates.

There are the home loan interest rates that are advertised by the banks, but then there are the discounted rates that they can offer too.

A good place to see all of the advertised home loans interest rates is on the Mortgage Rates website.

You can use these as a guide, but it’s always best to have a good mortgage adviser source rates for you as they can often get more competitive rates.

If you have a low deposit (under 20%) then you will need to consider the low equity margins that the banks apply too.

 

Back to Index

What credit score is needed to buy a house?

Credit scores have  become commonplace in New Zealand lending over the last few years.

When you apply for a home loan either the mortgage broker or bank will do a credit check, and as well as showing the enquires and any payment defaults the credit checks now all have a credit score.

Credit scores range from 0 – 1,000 and the higher the score the better risk you are deemed to be for lenders.

The credit score is made up from a range of information including your shopping pattern which includes the type, number and date of any credit inquires,  your demographic stability (changes of address), the age of your credit file and your repayment history including any payment defaults, collections or judgements.

Some banks have adopted a minimum credit score into their lending policies and the general rule is they will not lend to people with a score below 300; however there are exceptions and some lenders that do not focus on credit scores as much.

 

Back to Index

Can you be denied a loan after pre approval?

Unfortunately the answer to this is YES.

Often the banks will do a pre-approval either over the phone or online and in these cases they rely on the information that you provide them. It seems like they have approved you for a mortgage but there is a lot of fine print and it’s not until they receive the supporting information and assess your loan application correctly that some things become obvious and at that time they may deny or cancel any pre-approval.

Most mortgage brokers do not have the ability to pre-approve mortgages without getting the supporting information, which means getting a pre-approval with a broker takes longer but because they have the information the pre-approvals that mortgage brokers source are typically more robust and less likely to be denied later.

Even if you have a mortgage pre-approval from a bank it would be well worth getting a second opinion from a mortgage broker. This is something that most brokers should be happy to do for you at no charge and it will highlight any areas of concern or gives you confidence that you can rely on the pre-approval.

Of course sometimes things happen to significantly change a persons situation and that could void any pre-approval.

Back to Index

Are mortgage brokers free?

A mortgage broker may seem to be offering a free service and in many cases you will not pay.

Of course nobody works for free and mortgage brokers do like to get paid as there is often a lot of work that is done to help you get your finance approved.

The reason people think that mortgage brokers are free is because mortgage brokers are often paid by the banks and lenders when you successfully get a loan. When this happens the brokers aren’t paid by you, but they are paid a commission by the lender that you end up going with.

In some cases especially with non bank lenders you may be charged a fee by the broker or a fee is specified within the lenders loan offer.

Your mortgage broker will be able to confirm if they are paid by the bank in which case they will not charge you, or let you know if there will be a fee and what that fee is.

Back to Index

Can I pay more off my mortgage?

When your mortgage is set up you are advised on what the repayments will be and you may want to pay a higher amount in an effort to pay off your mortgage faster.

As mortgage broker when someone asks “can I pay more off my mortgage?” the answer will almost always be yes; however it really does depend on how your loans have been set up as some banks will not allow you to pay anymore that the minimum on a fixed loan.

In general terms you can pay extra onto a loan that is a revolving credit or a floating rate loan, but a fixed rate loan has fixed repayments.

With fixed rate loans you can pay extra with some banks but not with all.

Ask an adviser or your bank and they can let you know what you can do with your loan or you can check the research on the various loans HERE.

Sometimes it might be better to refinance your mortgage to a bank that offers more flexibility with repayments.

 

Back to Index

Should I overpay my mortgage?

When your mortgage is set up you are advised on what the repayments will be and you may want to pay a higher amount in an effort to pay off your mortgage faster.

As mortgage broker when someone asks “should I overpay my mortgage?” the answer will almost always be yes; however it really does depend on how your loans have been set up as some banks will not allow you to pay anymore that the minimum on a fixed loan.

In general terms you can pay extra onto a loan that is a revolving credit or a floating rate loan, but a fixed rate loan has fixed repayments.

With fixed rate loans you can pay extra with some banks but not with all.

Ask an adviser or your bank and they can let you know what you can do with your loan or you can check the research on the various loans HERE.

Sometimes it might be better to refinance your mortgage to a bank that offers more flexibility with repayments.

 

Back to Index

Can you get a mortgage if you have bad credit?

As mortgage brokers we get asked a lot if you can get a mortgage if you have bad credit.

Often we are contacted after someone has spoken to their bank and been told that they can’t get a mortgage.

The key things to be successful in getting a mortgage if you have bad credit is to identify and explain the reasons for the credit issues, give the lender comfort that the issues will not repeat and to select the best lender for the given situation. Some of our mortgage brokers specialise in these types of lending scenarios – arranging bad credit mortgages.

Often the major banks will not provide mortgages to people with bad credit, but there are options with some banks and non-bank lenders.

You need to be aware that these are specialist loans and there are often extra costs and higher interest rates.

One of our team of mortgage brokers can do a free assessment and advise on this for you.

Back to Index

Which bank gives the best mortgage?

Everyone wants to know which bank gives the best mortgage?

This is a very common question and one that is almost impossible to answer and there are a lot of people that just focus on which bank offers the lowest interest rate on the given day that they are looking. Other times and especially with first home buyers it may be more a case of which bank will provide a mortgage.

Every bank has a range of home loan options and while they all look similar; however there are some differences that you should be aware of particularly if you want to pay your mortgage off faster. We research the bank options and you can read more about this HERE and we also have a mortgage reduction system that you can access if you are serious about paying your mortgage off.

To get the best advice on this you can contact one of our advisers.

You can have the conversation about what is important to you and they can then provide some recommendations for you to consider.

Back to Index

Why should I use a mortgage broker?

There are many reasons people have to use a mortgage broker and they may not be what you would typically think.

An experienced mortgage brokers are able to give you a lot of good advice and also offer you choice. A broker has a choice of bank and non bank lenders and can help you select the types of loans that would suit your situation best. A mortgage broker will also help negotiate the best home loan interest rates and can help ensure that you have a suitable loan structure.

The real question is why wouldn’t you use a mortgage broker?

Back to Index

Who pays a mortgage broker?

Did you want to know who pays a mortgage broker?

In New Zealand most mortgage brokers get paid a commission by the banks for residential lending so they do not need to charge you a fee. For loans that are sourced through the non bank lenders there will typically be a broker service fee which is specified within a loan offer and often paid when the loan settles, but these fees are ultimately paid by you as the borrower.

The mortgage broker will be able to explain how they get paid once they has done the initial assessment and know which bank or lender will be used.

There are some mortgage brokers that will charge an upfront fee, and others will commit you to a fee should you repay your mortgage within the first year or two years as they may have to repay their commission to the bank. Again, these fees should be disclosed before you commit to using that broker.

Back to Index

How much commission do mortgage brokers make?

When a mortgage broker arranges your mortgage with a bank they will get paid a commission.

Most banks will pay a commission which is calculated as a percentage of the loan size, so on small loans the commission is minimal but on larger loans the commission can see the broker being paid quite well. The commissions that banks pay can vary between about 0.45% to 0.90% and these are paid to the broker group. Some banks also pay the broker groups an ongoing commission or a fee for maintaining the mortgages.

The individual mortgage broker that you work with would often receive a share of the overall commission received by the broker group and this will vary a lot. Some brokers receive no commission and instead are paid a salary or a base retainer with a smaller commission component.

Back to Index