Is Mortgage Protection Cover Too Expensive?

Many people think mortgage protection cover is too expensive and therefore do not bother with it at all.

Bank staff always try to “sell” mortgage cover and sometimes are successful even if it means people just take the life insurance part of the plan. Mortgage brokers tend to be a little better at explaining the benefits and therefore might provide a more comprehensive type of cover, but still most people will go without.

Is Mortgage Protection Cover Expensive?

In short – it can be expensive!

But insurance cover of any kind is based on the cost of the claims, so an expensive insurance is only expensive because there are a high number of claims or because the claims are for a high dollar value. Either way, mortgage protection  insurance is more expensive than most insurances because the insurance companies pay out more in claims.

You could therefore say that it is one type of insurance that is used to protect people.

It Doesn’t Need To Be Quite As Expensive

Like many insurances, you need to establish what the risks are and if you can afford to accept some of the risks yourself.

With mortgage repayment cover it may be that you could survive for ‘say’ 3-months without income before you start having serious money issues. You might be able to apply for a mortgage holiday for up to 3-months or use savings, but by increasing your waiting period (excess) on a repayment cover from the standard 4-weeks used by most banks to 13-weeks you can reduce your premiums significantly.

You can also look at the term that the cover would pay out for.

By limiting the benefit period to ‘say’ 5-years instead of the standard ‘to age 65′ you can reduce the premiums. To be prudent you may wish to add some permanent disablement cover to your policy, but even with this included the premiums are generally lowered.

Health Tip

We had to add this picture – this ‘health tip’ goes to show that you can save money, but often the outcomes may not be what you want.

Be Careful Taking ShortcutsApples

It is easy to trim costs or go for the cheap option with anything; however with insurance you do need to be extra careful as often a ‘cheap’ option will not provide what you expected.

If you are comparing policies you need to ensure that you compare apples with apples and generally this is something that better insurance advisers do, whereas banks generally only offer one option – no choice.

Seek Advice Of An Expert

There are some very good insurance advisers and mortgage brokers that can provide advice on the various mortgage protection cover options. Make sure that they explain the key policy differences and why prices are different.

This is one area where you can still get expert advice for free.

Make sure that anyone you speak to is able to offer comparisons as there are still people that call themselves advisers but whom are really just salespeople who will “sell” you anything so they get a bigger commission and incentives.

If mortgage protection cover is too expensive review it today.

 

 

 

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KiwiSaver And The Story Of The Missing Millions

KiwiSaver and RetirementThere are now about 2.3 million people in KiwiSaver and this is great, but when you consider that those people are now making some effort towards having a better retirement; however we understand that almost 50% of those people (over 1-million people) have invested in low-risk, conservative or cash funds.

Furthermore, about 20% of people in KiwiSaver are in one of the nine default funds which they were automatically enrolled into when they join the scheme. That is almost 500,000 Kiwi’s that have probably not bothered to consider their options or talked to anyone (who they felt they could trust) about their options.

The Story Of The Missing Millions

According to ANZ, KiwiSaver members have missed out on more than $200 Million in 2014 because they are not in the right scheme. In this recent article published on the Good Returns website, ANZ’s Ana-Marie Lockyer illustrated this with an example of a KiwiSaver member earning $55,000 and contributing their minimum 3% contribution, matched by their employer – so a total of 6% of their contributions.

Since 2012, if the member had had $10,000 to start they may only have a total of $25,619 with ANZ’s Conservative Fund. But if they had instead been active in their Growth Fund then they would have $5000 more.

Remember when someone is enrolled by their employer (as the majority of the population has been) they are enrolled in one of the default funds. These are structured to be very low risk funds but also give very low returns to the investors and that may only see a growth rate of around 2.41% according to a Morningstar report as recently as December 2014. We know now that almost 20% of people are still sitting in their default scheme and therefore not getting very good returns.

Whilst this might be the sensible thing to do politically, after all, whilst there are higher rewards for more aggressive investments there is also a greater risk, it relies on New Zealander’s being more active in their retirement planning at a young age.

Should You Be More Aggressive?

It is fair to say, that some people and especially younger KiwiSaver members could invest in a more aggressive fund. This way you get the advantage of potentially higher returns which should help you accumulate a bigger nest egg for retirement. Of course there are no guarantees, and if you plan to make a first home withdrawal you may want to take a more conservative approach, but it is definateley something to consider and to talk to your adviser about.

Many of the  aggressive funds have returned an average of over 10% for the past 5-years.

Remember, KiwiSaver and the fund choice which is right for one person at the age of 30,

may not be right for someone at 60 planning their retirement.

The Commission for Financial Capability  runs the website “Sorted” and they have a “fund finder” which directs you to the type of fund that you should invest in. The KiwiSaver fund finder sorts funds into five types and includes a short questionnaire to help you work out which type to look at. The three questions to help you find the right type of fund for you are based on two things: how much time you have before you start spending your KiwiSaver money, and your attitude towards risk.

  • If you answer 0–3 years, you go into defensive or conservative, depending on how you answer the second two questions.
  • If you answer 4–9 years, you go into defensive, conservative or balanced, depending on how you answer the second two questions.
  • If you answer 10 years or more, you go into defensive, conservative, balanced, growth or aggressive, depending on how you answer the second two questions.

This means that no one, even a risk lover, is directed into anything riskier than conservative for less than 3 years, or anything riskier than balanced for less than 10 years.

If we were to see a drop in stock prices this might have a major impact on retirement planning. Or a young couple, wishing to use KiwiSaver contributions towards their first home, may wish to have the security of knowing that their investments will not fall in the short-term.

Investments can go down as well as up, but over time, growth funds do tend to perform better over time as illustrated by the graph below.

Cumulative Performance of Selected Funds
“Aggressive Funds are more more volatile, but over time tend to perform better”

 

Consider Your Life Stage

Many investment experts have called for “a lifetime approach for default schemes where an investor’s risk profile was adjusted to fit their stage in life” and the reality is this should not just be reserved for those people in the default schemes.

There are a few of the providers that provide a life stages type structure whereby the allocation of funds alters overtime as you get older. The table below shows the life stages fund mix used by Generate KiwiSaver;

KiwiSaver Life Stages

 

You can see that your investment moves to being more conservative over time.

Time In The Market

Financial planners have a saying that time in the market is more important than trying to time the market. The fact is that the longer you have to invest in a market the more aggressive you can be as you have time to recover from any periods of loss.

We just need to look at share markets over time.

Dow Long Range Trends

If you had invested in an index DOW fund for long enough you would have always made money. This is typical of any share market, but with short term investing in any share market or property market there is a risk that values could decrease.

The good thing for most people investing in KiwiSaver is they do have plenty of time in the market.

KiwiSaver is a retirement fund so for younger people this could mean that they are investing for over 40-years.

If you invested $40 per week and your employer matched that, and assuming a rate of return of 4% you would have accumulated $182,519 over 40-years, but if you were more aggressive and managed to achieve a return of 8% you would accumulate a massive $506,966 – that’s $324,447 more!

Banks Offer KiwiSaver, But Are They Any Good?

Most banks now offer a KiwiSaver scheme and they “sell’ them to you every time you visit a branch.

We talk to people all the time that have their KiwiSaver in a bank run scheme, and the reasons they are with the bank is generally given as one of three;

  1. The bank is safer
  2. The bank suggested they switch
  3. The balance is visible on internet banking

Of course, the banks want you to use their KiwiSaver schemes, but these reasons are not good reasons.

Firstly, money in your KiwiSaver is held by an independent trustee company not the bank, and therefore all KiwiSaver providers have the same level of safety or security. This was a mechanism introduced for KiwiSaver as a safeguard but is something that the banks generally fail to explain – they prefer that you think that your money will be safer with a bank scheme.

When a bank staffer suggests you switch your KiwiSaver they are doing it to reach their targets. Some banks are very good at the upsell just like McDonald’s do with the “would you like chips with that” concept. It is a great sales technique and it works, but it doesn’t meanthat the banks KiwiSaver is any better.

Having your KiwiSaver balance on your internet banking is “nice” but really makes no difference.

The main issue I have with a bank offering KiwiSaver is independence – who are they really working for?

When you invest money in KiwiSaver a portion of your money will be invested in “cash” which is typically with the banks. An independent KiwiSaver provider will invest that money with the bank offering the best returns for you; however if a bank is investing your money they will almost certainly invest your money with themselves. It is an easy way to get deposits and most people do not scrutinise their investments to see what rate of return they are being offered for those cash investments.

I prefer to use a specialist KiwiSaver provider that is not owned or influenced by a bank.

You Need To Decide What To Do

The great thing with the way KiwiSaver was set up is the ability to switch providers, but unfortunately with the recent changes imposed on financial advisers there are now only a few that will provide advise. The banks are exempt from the rules that advisers work within and therefore it is the banks that are “selling” the most KiwiSaver – but without advice.

Ultimately your future is in your hands and you need to decide what to do with your KiwiSaver and any other investments.

 

 

 

 

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Make Regular Networking Part Of Your Business Marketing Plan

Being a small business owner with a limited budget can make marketing a difficult task.

small business financeYou cannot afford to throw money at flashy marketing campaigns and need to make sure that the time spent and every dollar spent gets a return – that it generates profitable business.

You have to be smarter than the big corporate’s!

Word Of Mouth Marketing Really Works

Now we also know that word of mouth marketing works.

Practically everyone knows how important word of mouth is and yet very few people include this in their marketing plans as they do not know how to develop it effectively.

Having clients and business associates referring people to you and/or endorsing you is the best way to get more business. The people referred to you are already willing to do business with you so you can get on with helping them rather than having to convince them to deal with you first.

Some people now rely on social media like Facebook to ‘share’ good news stories and offers, but word of mouth marketing really works better when you are face to face with potential customers.

WOM 9 10

Marketing experts tell us that currently only about 10% of word of mouth conversations about brands happens online, meaning 90% still happen as real people speak to each other in real conversations. The good news for small business people is they can be just as effective as the big corporates at getting people talking about their brand – if they have a plan.

So how do you really develop and supercharge word of mouth marketing?

Build Relationships To Build Sales

Small business owners generally are sole operators or have small teams and therefore have to be flexible and willing to do everything within the business which includes the sales and marketing role.

Many small business owners are great at the “stuff” they do, but are not good at telling people what it is they do. They are not good at marketing their businesses.

One of the best ways to market any business is to have a network of people that know your business, know the types of customers you are looking for and can therefore find those customers for you.

Wouldn’t it be easier to build strong relationships with a small group of people than trying to “sell” to the masses?

That is why I joined Business Network International (BNI) when I was offered the chance, and it is also why I would encourage any small business owner to seriously consider getting involved in regular networking groups and

Business Network International

business networkingWhat Is BNI?

BNI (Business Network International) is a business and professional networking organisation that allows only one person from each profession to join any group or chapter. There are currently 126 chapters in New Zealand and some 2,650 members with a number currently under formation. Worldwide there are over 160,000 members in over 6,500 chapters in 55 countries.

 

Unlike other networking groups, BNI provides its members with a structure and a plan to enable them to network in a deliberate and professional manner. It is structured weekly networking breakfast which focuses on learning and positive business outcomes.

A breakfast networking meeting follows a structured agenda as follows;

  • The event starts at 7 AM and finishes at 8:30 AM and follow a strict agenda
  • The group has an education officer whose job is to spend a few minutes biding some educational type that may be useful to the group members
  • Every member gets 60 seconds to talk about their business or something specific that they want to share this is your chance to train the other members so they can promote your business while they are out doing the business
  • All members get to do a 10 minute presentation on a rotational basis for 10 minutes presentation is your chance to explain your business in more detail the other members as a group
  • Prior to the conclusion of each weekly meeting there is ace session where you pass Referrals between membership of course you may pass Referrals on in between meetings is appropriate we measure the number of referrals and the business generated from those referrals to ensure that we have some way of measuring the success of the business and the bit for the group
  • Prior to the commencement of the meeting and at the conclusion of the meeting there is good opportunity to meet and mingle with the other members
  • Members are also encouraged to meet outside of the meeting to learn more about each other’s businesses

Fish Out Of WaterRegular Networking Is The Key

A lot of people feel like a fish out of water when they attend networking events and that is where structured meetings like BNI make networking a lot easier. The members are real people like you, and they’re always keen to have new members join as each person becomes an extension of their word of mouth sales team.

Meeting weekly works best as it keeps the concept of finding referrals for other top of mind. I admit when I first joined BNI I thought that the commitment to meet each and every week was too much effort, but I have been in networking groups which meet less often and definitely have had more success from BNI than any other networking group or event.

The Power Of Your New Sales Team

For many small business owners and especially sole operators or people running businesses out of their homes, just getting out there and prospecting can take up a lot of your time.

You are a small business with a limited budget so are not able to throw much money at marketing and therefore joining a networking group is often a very good option.

When you join a networking group like BNI you are able to connect with other business people that are able to help you build your business. You can empower the members of a group to be your new sales team and look out for business opportunities for you. In many cases there are businesses that can naturally work together and you can take advantage of those opportunities and align your business with others that can refer business to you.

There are huge benefits in referral business.

Referral Business Is The Best Business

When you get referred to someone for a product or service there is automatically an element of trust – the “selling” aspect is removed.

If someone tells me that I should us ABC Plumbing, then chances are I will use them

without looking at other options and without being critical on price.

People refer other people because they want to help.

Networking groups like BNI help nurture the art of giving referrals.

The key thing with any networking group is to get involved with a group that has a good number of members and a lot of energy at the meetings. Unfortunately most networking groups only allow one person from each profession and therefore it can be hard to get into the better groups.

BNI Starting In Westgate

I personally know how successful BNI can be after belonging to a group for a few years and now I am involved in starting a new group in Westgate which will be a very successful group. The group will officially be starting in April with a pre-launch meeting in March and while a number of people have already reserved their spot (profession) there are plenty of professions not yet represented.

Contact me if you are interested:

Stuart Wills

Mortgage Link (a mortgage broker)

Phone: 09 8392189    Mobile: 021 984340

Email: stuart.wills@mortgagelink.co.nz

If you want 2015 to be a better year, try to get involved with a regular networking group.

 

 

 

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House Flipping Is Nothing New For Kiwis

Before we start let us point out that if house flipping were that easy, we’d all be real estate millionaires.

To be successful when you flip a house you must educate yourself before you even start looking at houses to buy. This is not the same as property investing – flipping is about buying and selling, not buying and holding.

What Is House Flipping?

house flippingHouse flipping is when people buy homes and then resell them after a short time with the aim to make a profit. The term “house flipping” is not common here in New Zealand as many people consider buying a do-up as a hobby rather than a business, but things are changing.

Can you make money flipping houses?  Yes

Can you make a lot of money doing this? Again, yes

There are some people that have made a full-time job of flipping houses and they do make good money, but you can also make losses if you fail to do your research, make a bad decision or just if the market moves against you.

Mark TraffordSome of the biggest pitfalls when renovating houses to sell are;

Procrastination – time is money and flipping houses is often about speed and doing a number of houses with smaller profit margins rather than pinning your hope on a few hugely profitable projects.

Budgets – you need to have an accurate budget to work with. At the outset this means estimating the costs accurately and not thinking that everything can be done cheaply.

Market movements – the property market moves up and down over time. You need to understand the market at the time and be in and out of the market with your property before there is a downward swing.

Mark Trafford, who is a property investor and director of home renovations company Maintain to Profit says that about 90% of renovations go over budget and about 40% take longer than expected.

To make money house flipping means planning your projects carefully and working to a carefully calculated budget.

You Need To Do Your Research

You need to make sure that you know the local real estate market well.

You want to buy a home in a great location, fix it up, and sell it at a profit as quickly as you can and in order to sell the home quickly and for a profit it must be well presented located in a great area. The longer it takes to sell the house, the more money you’re going to spend on your mortgage repayments and other expenses.

You must educate yourself before you even start looking at homes.

Here are some of the key areas that you need to research;

  • Understand the ins and outs of your local real estate market. Where do people want to live, right now? What kind of houses do people want to buy right now? Don’t speculate about the up and coming neighborhoods. Remember, you want to flip this house which means having it sold fast.
  • Speak to a mortgage broker and know how you are going to finance the purchase of the house and then the costs of renovating the house. The financing costs will directly impact the profits you make when you flip a house and therefore you want to minimise the costs.
  • Don’t avoid the tough question if you want to flip a house. How much you can afford to lose on the deal? While you never want to lose money, you should have a budget that includes selling a house quickly if required even if it means making a loss.
  • Learn how to negotiate both the purchase and sale of the house effectively. The less money you pay for a house and the more you extract from the sale equals a higher profit. This means being strong when dealing with real estate agents or vendors on the purchase of a house, and then being tough but realistic when selling the house. Some people try selling the house privately, but often a real estate agent can get a higher sale price and even while you have to pay their fee you can end up with more profit in your pocket.
  • Know how to spot a good deal. You will only know a good deal if you know what the house should sell for, what the house will cost to renovate, your financing costs and therefore what you can afford to pay for the house to ensure there is still the desired level of profit in the deal,
  • Establish a network people that you can work with to get the renovations completed. You need to have people that you can contact to price a job and to ensure you get the best deals possible on all of the renovation work required. There are some very good companies that project manage all the trades people for you and are worth considering if you are not experienced or do not have the time to project manage the jobs yourself.

Contact Maintain to Profit

Contact Jack of All Trades

See Mortgage Link’s Business Partners

  • Know which home improvements increase the home’s value and focus on these projects first. Some home improvements increase the value of a home straight away and might include upgrading kitchens and bathrooms, repainting the home’s interior and exterior, upgrading the deck and opening up the living areas, landscaping and/or adding a sleep-out. Make sure you don’t waste money on home improvements that won’t increase the selling price.

Buying Right Is Important

Once you find a home you like and that fits the budget, you make an offer on the home.

If it’s a great house selling for a low price, you might have competition from other people that want to flip a house, buying a first home or investment property.

Some people flip houses full-time, and they will likely know about the house you have identified too.  They may have experience and tradespeople on staff and therefore can often flip a house for a lower margin that you, so walk away from deals if the purchase price is higher than you are willing to pay. Remember this is a business decision – you are not buying a home to live in.

Who Is Going To Do The Work?

What are you going to do yourself and what are you going to employ contractors to do?

Doing the work yourself might save you money, but often takes longer. If you are going to get contractors in to help with the renovations you need to ensure that you have budgeted the costs correctly and that the tradespeople are available when you need them.

Loads of people underestimate the time and cost of renovating a house and this can be a financial disaster when you are flipping houses.

Get Tax Advice Before You Start

If you plan to buy and sell houses for a profit then you should talk to an accountant and find out what your tax obligations are. If you are treating this like a business then you should pay tax on your profits in the same way a business does, and then there may be GST obligations too.

Of course, many Kiwi’s buy homes and do them up before selling them for a profit and we know that a lot of these people pay no taxes.

We would always suggest that you speak to your accountant and ensure that you have the right advice on tax before you get started. You want to be 100% clear with any tax obligations and decide the entity (company structure etc) to buy the properties. Most of all you do not want to end up with the IRD chasing you and imposing penalties.

Get The Correct Finance

You want to ensure that you have your finances in place before you start unless you have cash available.

The finance you require needs to be readily available and flexible so you can access funds when they are required. These types of projects are not like new builds, you want to be able to move quickly and take advantage of opportunities when they pop up.

Often you can purchase a used kitchen or carpet that can be significantly cheaper and therefore underpin larger profits.

You may be better to have finance that has a slightly higher interest rate if it has more flexibility, or finance the house purchase and the monies to renovate in two separate facilities to give you lower interest rates on the bulk of the finance with a working facility that is more flexible.

Speak to a finance broker to get the best options.

Be 100% Committed

Flipping houses is not for the faint hearted and you need to be 100% committed to the projects that you do.

The investment in each property or project is substantial and while there are big profits to be made, there will also be times when you might make mistakes and therefore incur losses.

Preparation is key to your success with house flipping.

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Smart Business Means Reviewing Your Business Honestly

Do you want to transition your business into a smart business?

Honestly, the fact is most people in business could do better.

The definition of “better” will differ between different people too – some want to increase profits, others want to grow their business so it can operate with less reliance, some want to reduce the hours they work while others may want to prepare a business for sale.

The Starting Point

If you want to transition your business into a smart business you first need to have absolute clarity about your current situation. This demands closely looking at your overall business and asking “what’s working?” and “what’s not working?”

Ultimately profit is the measure of success.

I know some people say customer satisfaction or enjoying the work are the measures of a successful business and while those things are “nice” they are subjective and impossible to measure – the only real measure is profit and in many businesses that is driven by sales.

What are your current level of sales?

What exactly are you selling, which customers are you selling to, at what prices and with what level of profitability? Break the sales down by product, product line and/or service offering. Then try to identify the marketing or distribution channel that lead to the sales.

In order to make smart business decisions you need to have clear data and this is where many small business owners fail to recognise problems within their business, inefficient processes and lost opportunities.

Remember, ultimately you need to treat the customer as king by providing excellent customer service as this is the key reason that your customers will choose to deal with a small business like yours rather than a large corporate. Most people do respect working with other people that offer great service and advice, and people that value those things generally understand that good value equals more than just the best price too.

The Steps For Making Yours A Smart Business

In this article we do not go into too much detail, but instead have divided the

smart businessIntroduce Key Financial Indicators

Every business needs to measure key indicators and results so they know what is happening within the business today, and more importantly what effect any changes may have.

In the industry these are called your KPI’s – your key performance indicators.

It is critical to have KPI’s as a way to measure your business success, but you must keep them simple and relevant otherwise you will not use then and therefore they are of no benefit.

Finances: Look at your cash flow and levels of profitability produced from each product, service and area of activity. Are your profits increasing, staying about the same or are they going down?

You want to review your products and services to ensure that they are priced to remain profitable but also competitive in the market. You may need to adjust the price, look at packaging the product differently or focus on a different market that may be willing to pay more.

Productivity: Look at the percentages and analyze your profits per sale and your return-on-investment. In a service industry you might classify your investment as time at work – what is your hourly rate?

We continue to hear that New Zealand businesses are not efficient when compared to similar businesses in other parts of the world, and while we can make any number of excuse’s for this a smart business person will forget about excuse’s, roll up their sleeves and make the changes needed.

Measuring productivity is more than just measuring sales. Depending on the business you might want to break down the sales process and measure prospecting or presentations done or add-on services sold etc… Think about your business and the key things that help increase sales and/or profitability.

Air NZ a smart business

“I love the black planes!”

People admire a business like Air New Zealand which has transitioned into a highly profitable business during hard times in the airline industry and continues to receive accolades for the service levels. Of course they did not get there by being “nice” all of the time, there have been some hard decisions along the way which have not  always been popular; however unlike so many other airlines around the world Air New Zealand provides a profit back to New Zealander’s instead of requiring Government funding.

Clear Away The “Fog”

Perhaps the most important word in any strategic planning is “clarity.”

You must be absolutely clear about what you are doing. This comes from having the right data which enables you to make considered decisions, and then explain those decisions to staff and other interested parties so they can understand the reasoning and come on board with the changes you introduce.

Fogginess and vagaries in any area of business and even personal life can lead to problems and can be costly.

Financial Indicators: The financial indicators paint the picture of how the business is doing now and you need to understand what drives each piece of data so you can make changes and monitor the success or not of that change.

Look At The Past: Why has your business been successful in the past? What have you done well in the past that has been responsible for your success to date and where did things change? What are the most important skills and competencies that your company possesses today? What are the very best products and services that you have offered or offer right now?

What About Your Competitors: Identify who your competitors are and take a close look how successful they are. Take the time out of your business to look at the most successful ones and see what they are doing the same as you and what they do differently – plus look at the competitors that are not doing so well and ask the same questions. Talk to your suppliers and they might share some valuable information on what is working in the current market.

Be objective and you might be surprised at what you find.

Your People: Look at the people in your own business. Who are your most valuable people? What people are doing jobs that are no longer as valuable within your business? What people are struggling to cope with the workload?

Xero

Technology has changed the way many businesses operate. Many jobs within businesses can now easily be streamlines or even replaced by introducing smart business technology or can be outsourced. Accounting packages like Xero can be linked to point of sale and can now automate a lot of the data entry, can allow a bookkeeper to work offsite, can directly link into external debtor management software and people, can provide your key performance indicators, can link into software to manage your customer database and marketing and so much more.

Be prepared to review every aspect of your business, but do it with total clarity and be honest with yourself.

Don’t Forget The Customer 

Who are your best customers today?

In order to provide good customer service, you must know what your best customers all have in common and aim to attract more of those customers so you can focus on providing everything that those customers want so they not only become great repeat customers – they become advocates for your business and tell others how great you are.

There are some problems that are common to the way many small businesses treat their customers;

Often new customers do not really understand the scope of the product or service that you offer. If you can explain this at the outset and be absolutely clear about this then everyone knows what to expect.

Delivery time-frames are often over optimistic – this is especially so when your business is relying on a third party where you have no control over their delivery times. Customers may want everything ‘now’ but this is not always possible and even if you explain this, the customer does not always hear the message – you are best to confirm this in writing right at the outset.

New Zealand mortgage brokers

As mortgage brokers we often have customers requiring finance within very strict time-frames and we are reliant on the customers to provide information and the banks to turn around our applications within the time-frames we request; however we have limited control and this can often be frustrating for all involved. Often we would set an expectation of ‘say’ 4-days when we hope for 2-days, but we would rather set an expectation and deliver early that put undue pressure on everyone when there need not have necessarily been that stress and pressure.

When you do have a problem (which will happen) then you need to deal with the problem swiftly and with absolute clarity. If you can deal with a problem well then you can win that customer for life.

Remain Honest To Yourself At Every Step

Look at yourself honestly and analyses what you do and whether you do it well.

What are your personal skills, qualities and abilities?

What are the most important things that you do at work, and ask yourself if you need to be the person doing those things?

Sometimes in business we start off having to do everything even if we are not good at a job or just do not enjoy it – we do it because there is nobody else able to do it at that time.

You should be absolutely focused on what you do best and what delivers business profits.

Smart business requires that you begin with a realistic and honest assessment of exactly what you are good at, and therefore what your role should be within the business. You may be “the boss” but not be good at business management or staff management and that’s okay. You can still be “the boss” and own the business and ultimately the business decisions, but you can appoint someone else to manage the business or the parts of the business that need the expertise that you do not have.

Panel Beater

We had a customer who is a panel-beater and exceptionally good at his trade. I would have had no hesitation at referring people to him, but as his business grew he got off the tools and into the office. He hated the paperwork and was never good at it, and the staff were not as good on the tools and so the quality of the work and therefore customer satisfaction slipped.

This was evident and he employed a manager and is now back on the tools managing and teaching his junior panel-beaters, and while he is no longer the manager he is still the owner and the owner now of a very successful business.

Taking The First Step…

We hope you found this article helpful – please share it.

Brian Tracy Time Management

In our mortgage broking business I am constantly trying to improve what we do and how our customers find their experience. I am the first to admit that we do not always get it right – at times we get overwhelmed with business and sometimes I am embarrassed by the levels of service we are able to deliver. What I do know is that we improved over 2014 and we have made more changes and we will improve both service levels and profitability during 2015 – I am committed to doing that!

I am happy to discuss your business with you and give you an honest idea from an outsiders point of view, but there are better people than me to help manage you through the process of change.

The first step though is to recognise that you are not doing everything as well as you could be, and therefore you are open to making some positive changes to the way you manage your business.

This is really just a taste of what we know can be done and maybe your starting point for strategic planning, thinking and ultimately the move to being a smart business.

 

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What Waiting Period Is Appropriate For You?

When you decide on an income protection or mortgage protection cover you will be asked what waiting period you want, and most people don’t really have any idea. Of course, if you make a claim you will always want the payments to start as soon as possible so a 2-week or 4-week waiting period might seem long enough to wait; however the wait period is like an excess and the shorter this is the higher the cost.

Who Needs Income Cover?

Horizon Research has published data that shows that only about 15 per cent (1 in 7) of New Zealand households have income protection insurance and that there are nearly one million households with incomes above $20,000 that would be vulnerable if they faced a long term illness that stopped a major earner in the household working.

Some people think that ACC will cover them financially, and in cases where people are unable to work due to an injury ACC does often help. If you cannot work due to a illness they you then need to rely on the sickness benefit entitlement which is around $343 a week, but your entitlement to this benefit is affected by your partner’s earnings and is only available if your other household income is below a certain figure. This means that many families find themselves too well off as a household to qualify for a sickness benefit, but too poor to pay the mortgage and food bills.

The reality is most people would be grateful to have income protection cover if they ever found themselves unable to work due to either injury or accident.

The question then becomes cost of the cover and which policy to choose from. You want to ensure at claim time that you have the best policy and you want to know that the money is available when you need it.

One of the biggest influences to the cost of cover is the wait period and that is why we have dedicated this article to the subject of waiting periods.

waiting periodWhat Is A Waiting Period?

If you become disabled, you’ll have to wait a certain number of days before you are entitled to collect disability benefits.

You are able to choose the length of your waiting period when you purchase your income protection or mortgage protection insurance policy. You’ll generally be offered a choice of waiting periods ranging from 4-weeks to 104-weeks (30 to 720 days) and you should base your decision on two factors: (1) how long you could live off your savings without receiving disability benefits, and (2) how the waiting period affects the premium you pay.

Many people with these type of insurance do not remember what their waiting period, may not have ever recalled being offered a choice and have probably never thought to review it.

The 4-Week Wait Is Common

Most of the insurance quoting software defaults to a 4-week waiting period and this is also the waiting period used by most bank staff and insurance brokers. There is no specific obvious reason for this except some people might suggest that it is to ensure that people do not go to longer waiting periods.

You see, insurance companies like receiving more premiums and so do the bank staff and insurance brokers as the more the premiums are, the more they earn. Insurance companies will earn more with higher premiums and the commission that they pay to brokers is based on the premium collected.

Or it may be the default because the 4-week wait period is the most common.

When you decide to get an income protection or mortgage protection policy you should consider what wait period is appropriate for you.

Base Your Decision On Your Needs

Auckland mortgage broker Stuart Wills always says insurance is expensive and therefore you should select the cover you need to ensure you have financial protection rather than a windfall gain because you decided to treat insurance like a lottery – that meaning you will be far better off after a claim. The concept of having insurance is not “a money making scam” but rather a form of financial protection.

The hope is that you will never need to make a claim, but the reality is that about 50% of males are likely to become disabled due to an accident or illness which will prevent them from working for at least a month before they turn 65-years old. This increases to 70% with females, but more importantly of those females about a third will still be on claim after 12-months.

This would suggest that most people need to have cover, but how soon do you need the payments to start?

How long you could live off your savings without receiving disability benefits?

The easiest way to calculate this is to look at your monthly take home income versus your savings. If you have a take home income of $2,500 and savings of $5,000 then you could determine that you could wait 2-months before you have exhausted your savings and need the insurance to start paying out.

If you have a mortgage you could always apply for a mortgage holiday (which most banks offer) and this should allow you a period of 3-months without having to make the mortgage repayments. For this reason many mortgage brokers would suggest a 3-month waiting period.

Reduce Insurance Costs

As mentioned, one of the easiest ways to reduce the cost of income cover or mortgage protection cover is to have a longer waiting period. Of course, from the insurance companies view having a longer wait period means you are less likely to make claims for those shorter periods when you may be off work and therefore they can factor this in when pricing the policy.

When we look at premium costs;

The premiums for $2,500 per month ($30,000pa) for a 45-year old male in good health and a non-smoker working in sales would be just under $115 monthly with a 4-week waiting period (with Sovereign as below), but change the wait period to 13-weeks (3-months) and the monthly premium cost reduces to just under $55 a month which is about half the cost.

Capture

 

People might think that income protection cover is too expensive, but sometimes you need to consider how the policy is structured.

Should You Have Income Cover?

In most cases we would need financial help of some kind if we were unable to work for any period of time. The time we can survive will differ with each and every situation and even as you go through life your own situation will change.

As illustrated here, one of the easiest ways to reduce the cost is to have a longer waiting period.

If it really comes down to it most people could survive for 3-months without their income, especially if their spouse or partner was able to continue to earn money and even if it meant getting a mortgage holiday and paying for some things on the credit card or with help from family.

Beyond 3-months when the mortgage needs to be paid and savings have diminished things might get more difficult, but you do need to consider your own situation.

Remember, check what waiting period you have or have been quoted.

 

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Understanding What Waiting Period Is Appropriate

When you decide on an income protection or mortgage protection cover you will be asked what waiting period you want, and most people don’t really have any idea. Of course, if you make a claim you will always want the payments to start as soon as possible so a 2-week or 4-week waiting period might seem long enough to wait; however the wait period is like an excess and the shorter this is the higher the cost.

Who Needs Income Cover?

Horizon Research has published data that shows that only about 15 per cent (1 in 7) of New Zealand households have income protection insurance and that there are nearly one million households with incomes above $20,000 that would be vulnerable if they faced a long term illness that stopped a major earner in the household working.

Some people think that ACC will cover them financially, and in cases where people are unable to work due to an injury ACC does often help. If you cannot work due to a illness they you then need to rely on the sickness benefit entitlement which is around $343 a week, but your entitlement to this benefit is affected by your partner’s earnings and is only available if your other household income is below a certain figure. This means that many families find themselves too well off as a household to qualify for a sickness benefit, but too poor to pay the mortgage and food bills.

The reality is most people would be grateful to have income protection cover if they ever found themselves unable to work due to either injury or accident.

The question then becomes cost of the cover and which policy to choose from. You want to ensure at claim time that you have the best policy and you want to know that the money is available when you need it.

One of the biggest influences to the cost of cover is the wait period and that is why we have dedicated this article to the subject of waiting periods.

waiting periodWhat Is A Waiting Period?

If you become disabled, you’ll have to wait a certain number of days before you are entitled to collect disability benefits.

You are able to choose the length of your waiting period when you purchase your income protection or mortgage protection insurance policy. You’ll generally be offered a choice of waiting periods ranging from 4-weeks to 104-weeks (30 to 720 days) and you should base your decision on two factors: (1) how long you could live off your savings without receiving disability benefits, and (2) how the waiting period affects the premium you pay.

Many people with these type of insurance do not remember what their waiting period, may not have ever recalled being offered a choice and have probably never thought to review it.

The 4-Week Wait Is Common

Most of the insurance quoting software defaults to a 4-week waiting period and this is also the waiting period used by most bank staff and insurance brokers. There is no specific obvious reason for this except some people might suggest that it is to ensure that people do not go to longer waiting periods.

You see, insurance companies like receiving more premiums and so do the bank staff and insurance brokers as the more the premiums are, the more they earn. Insurance companies will earn more with higher premiums and the commission that they pay to brokers is based on the premium collected.

Or it may be the default because the 4-week wait period is the most common.

When you decide to get an income protection or mortgage protection policy you should consider what wait period is appropriate for you.

Base Your Decision On Your Needs

Auckland mortgage broker Stuart Wills always says insurance is expensive and therefore you should select the cover you need to ensure you have financial protection rather than a windfall gain because you decided to treat insurance like a lottery – that meaning you will be far better off after a claim. The concept of having insurance is not “a money making scam” but rather a form of financial protection.

The hope is that you will never need to make a claim, but the reality is that about 50% of males are likely to become disabled due to an accident or illness which will prevent them from working for at least a month before they turn 65-years old. This increases to 70% with females, but more importantly of those females about a third will still be on claim after 12-months.

This would suggest that most people need to have cover, but how soon do you need the payments to start?

How long you could live off your savings without receiving disability benefits?

The easiest way to calculate this is to look at your monthly take home income versus your savings. If you have a take home income of $2,500 and savings of $5,000 then you could determine that you could wait 2-months before you have exhausted your savings and need the insurance to start paying out.

If you have a mortgage you could always apply for a mortgage holiday (which most banks offer) and this should allow you a period of 3-months without having to make the mortgage repayments. For this reason many mortgage brokers would suggest a 3-month waiting period.

Reduce Insurance Costs

As mentioned, one of the easiest ways to reduce the cost of income cover or mortgage protection cover is to have a longer waiting period. Of course, from the insurance companies view having a longer wait period means you are less likely to make claims for those shorter periods when you may be off work and therefore they can factor this in when pricing the policy.

When we look at premium costs;

The premiums for $2,500 per month ($30,000pa) for a 45-year old male in good health and a non-smoker working in sales would be just under $115 monthly with a 4-week waiting period (with Sovereign as below), but change the wait period to 13-weeks (3-months) and the monthly premium cost reduces to just under $55 a month which is about half the cost.

Capture

 

People might think that income protection cover is too expensive, but sometimes you need to consider how the policy is structured.

Should You Have Income Cover?

In most cases we would need financial help of some kind if we were unable to work for any period of time. The time we can survive will differ with each and every situation and even as you go through life your own situation will change.

As illustrated here, one of the easiest ways to reduce the cost is to have a longer waiting period.

If it really comes down to it most people could survive for 3-months without their income, especially if their spouse or partner was able to continue to earn money and even if it meant getting a mortgage holiday and paying for some things on the credit card or with help from family.

Beyond 3-months when the mortgage needs to be paid and savings have diminished things might get more difficult, but you do need to consider your own situation.

Remember, check what waiting period you have or have been quoted.

 

0

Understanding What Waiting Period Is Appropriate

When you decide on an income protection or mortgage protection cover you will be asked what waiting period you want, and most people don’t really have any idea. Of course, if you make a claim you will always want the payments to start as soon as possible so a 2-week or 4-week waiting period might seem long enough to wait; however the wait period is like an excess and the shorter this is the higher the cost.

Who Needs Income Cover?

Horizon Research has published data that shows that only about 15 per cent (1 in 7) of New Zealand households have income protection insurance and that there are nearly one million households with incomes above $20,000 that would be vulnerable if they faced a long term illness that stopped a major earner in the household working.

Some people think that ACC will cover them financially, and in cases where people are unable to work due to an injury ACC does often help. If you cannot work due to a illness they you then need to rely on the sickness benefit entitlement which is around $343 a week, but your entitlement to this benefit is affected by your partner’s earnings and is only available if your other household income is below a certain figure. This means that many families find themselves too well off as a household to qualify for a sickness benefit, but too poor to pay the mortgage and food bills.

The reality is most people would be grateful to have income protection cover if they ever found themselves unable to work due to either injury or accident.

The question then becomes cost of the cover and which policy to choose from. You want to ensure at claim time that you have the best policy and you want to know that the money is available when you need it.

One of the biggest influences to the cost of cover is the wait period and that is why we have dedicated this article to the subject of waiting periods.

waiting periodWhat Is A Waiting Period?

If you become disabled, you’ll have to wait a certain number of days before you are entitled to collect disability benefits.

You are able to choose the length of your waiting period when you purchase your income protection or mortgage protection insurance policy. You’ll generally be offered a choice of waiting periods ranging from 4-weeks to 104-weeks (30 to 720 days) and you should base your decision on two factors: (1) how long you could live off your savings without receiving disability benefits, and (2) how the waiting period affects the premium you pay.

Many people with these type of insurance do not remember what their waiting period, may not have ever recalled being offered a choice and have probably never thought to review it.

The 4-Week Wait Is Common

Most of the insurance quoting software defaults to a 4-week waiting period and this is also the waiting period used by most bank staff and insurance brokers. There is no specific obvious reason for this except some people might suggest that it is to ensure that people do not go to longer waiting periods.

You see, insurance companies like receiving more premiums and so do the bank staff and insurance brokers as the more the premiums are, the more they earn. Insurance companies will earn more with higher premiums and the commission that they pay to brokers is based on the premium collected.

Or it may be the default because the 4-week wait period is the most common.

When you decide to get an income protection or mortgage protection policy you should consider what wait period is appropriate for you.

Base Your Decision On Your Needs

Auckland mortgage broker Stuart Wills always says insurance is expensive and therefore you should select the cover you need to ensure you have financial protection rather than a windfall gain because you decided to treat insurance like a lottery – that meaning you will be far better off after a claim. The concept of having insurance is not “a money making scam” but rather a form of financial protection.

The hope is that you will never need to make a claim, but the reality is that about 50% of males are likely to become disabled due to an accident or illness which will prevent them from working for at least a month before they turn 65-years old. This increases to 70% with females, but more importantly of those females about a third will still be on claim after 12-months.

This would suggest that most people need to have cover, but how soon do you need the payments to start?

How long you could live off your savings without receiving disability benefits?

The easiest way to calculate this is to look at your monthly take home income versus your savings. If you have a take home income of $2,500 and savings of $5,000 then you could determine that you could wait 2-months before you have exhausted your savings and need the insurance to start paying out.

If you have a mortgage you could always apply for a mortgage holiday (which most banks offer) and this should allow you a period of 3-months without having to make the mortgage repayments. For this reason many mortgage brokers would suggest a 3-month waiting period.

Reduce Insurance Costs

As mentioned, one of the easiest ways to reduce the cost of income cover or mortgage protection cover is to have a longer waiting period. Of course, from the insurance companies view having a longer wait period means you are less likely to make claims for those shorter periods when you may be off work and therefore they can factor this in when pricing the policy.

When we look at premium costs;

The premiums for $2,500 per month ($30,000pa) for a 45-year old male in good health and a non-smoker working in sales would be just under $115 monthly with a 4-week waiting period (with Sovereign as below), but change the wait period to 13-weeks (3-months) and the monthly premium cost reduces to just under $55 a month which is about half the cost.

Capture

 

People might think that income protection cover is too expensive, but sometimes you need to consider how the policy is structured.

Should You Have Income Cover?

In most cases we would need financial help of some kind if we were unable to work for any period of time. The time we can survive will differ with each and every situation and even as you go through life your own situation will change.

As illustrated here, one of the easiest ways to reduce the cost is to have a longer waiting period.

If it really comes down to it most people could survive for 3-months without their income, especially if their spouse or partner was able to continue to earn money and even if it meant getting a mortgage holiday and paying for some things on the credit card or with help from family.

Beyond 3-months when the mortgage needs to be paid and savings have diminished things might get more difficult, but you do need to consider your own situation.

Remember, check what waiting period you have or have been quoted.

 

0

The Effect Of Lower Home Mortgage Interest Rates For First Home Buyers

lower home mortgage interest ratesFollowing this weeks Reserve Bank OCR review and comments the wholesale interest rates have fallen sharply which has meant the banks can access cheaper money. It is therefore likely this will flow through to home mortgage interest rates so we will see the banks able to offer lower rates.

How Will The Banks React?

They are able to access money at lower wholesale interest rates  and this means;

- fixed mortgage interest rates should fall

- longer term home loan rates should fall faster

- term deposit rates and interest paid on savings accounts will almost certainly now fall

We say “should” as the banks typically react to what they need to do so they remain competitive; however they also want to protect their bottom line – the banks profits!

Will Lower Rates Make It Easier For First Home Buyers?

On the face of it you would expect that lower home mortgage interest rates would mean that a first home buyer could afford a home loan more easily, but there are two things that could affect this;

The Impact On House Prices – when people can borrow money at lower rates it becomes more attractive to borrow more and in particular makes property investment a better option, especially compared to having money in the bank where term deposit rates drop. We could therefore expect people to invest more in property and those mum and dad investors tend to target the same properties as a first home buyer would, which puts more demand on those houses and therefore pushes prices higher.

How The Banks Calculate Your Affordability -the banks assess affordability using interest rates deemed ‘test’ rates that are higher than the actual interest rates that you would get. For example ASB will use a rate of 7.40% which means on a standard 30-year mortgage they want you to be able to afford weekly mortgage repayments of approx $640 when the actual repayments will be about $525 per week. The question is with the interest rates now not expected to rise anytime soon, will the banks change the test rates they use?

Stop Paying High Interest RatesWhat Should You Do With Your Existing Mortgage?

Of course, if banks can access cheaper money they should be able to pass those benefits to their customers – to you!

History tells us however that banks will fight harder for new business as they expect that existing customers will not bother shifting banks as long as they feel they have been given something. As mortgage brokers we know that what the banks typically offer existing customers is not competitive. Anyone dealing with business banking tends to be disadvantaged more as the business bankers in some banks are responsible for retaining profits from their portfolio and the easiest way is to retain a higher margin on the interest rates offered to you.

This is when you should speak to a mortgage broker.

A mortgage broker can approach your bank and negotiate interest rates on your behalf, and most mortgage brokers will not charge for this as the banks pay the broker a fee for managing this process for them. For you, the best part is the broker knows what sort of rates the various banks are offering and tends to always get a competitive rate – sometimes quite a bit less than the banks might offer you directly.

Why Mortgage Link?

 

New Zealand mortgage brokers

 

There are a number of New Zealand mortgage brokers that should be able to help source lower home mortgage interest rates for you, but as a broker I always try to consider the bigger picture and ensure that you have;

- the most competitive home mortgage interest rates

- all of your debt at the best rates possible

- a mortgage structured so you can pay it off sooner

- considered any future plans

- identify and mitigate any risks

Getting you the best home mortgage interest rates is one part of what a good mortgage broker should do, and it is an important part; however it is more important to ensure that you are able to get rid of non-effective debt as soon as you can and that takes a little more planning.

Contact me today and we will discuss your situation and see how we can best help.

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Can You Afford To Buy Your First Home?

People are contacting their banks and mortgage brokers asking if they can afford to buy their first home.

There is real concern especially in Auckland where house prices are rising faster than people are able to save and combine this with the loan-to-value ratio (LVR) restrictions introduced in October 2013 which have created a lot of confusion about what is required for the deposit on your first home.

The belief is low deposit home loans no longer exist – wrong!

Discussion about the affordability of buying your first home is good, but I put together this to provide some clarity and hopefully helpful advice which should help you determine if you’re ready to buy their first home now, or if you need to make some changes first.

Of course we can always discuss an individual situation too as every persons situation is going to be different.

How Much Deposit Will First Home Buyers Need?

your first home Most lenders will say that you require a 20% deposit for your first home loan.

However, most lenders have loan products that still allow you to borrow up to 90% of the property value. Reserve Bank regulations allow for 10% of a lender’s home loan customers to have an LVR of over 80% and there are some exceptions too.

If you don’t have a 20% deposit and need to borrow more than the 80% threshold you should speak to a mortgage adviser who can talk you through your options which may include;

Banks – The Reserve Bank regulations allow for 10% of a banks new home loan customers to have less than a 20% deposit, so they can still offer some low deposit home loans.

Welcome Home Loans – through some banks Housing New Zealand also offers a Welcome Home Loan that requires a 10% deposit rather than the standard 20% deposit. Your mortgage broker will be able to help you arrange the application to one of these banks which include Co-Operative Bank, SBS Bank, TSB Bank, Westpac and some others.

Non-Bank Lenders – some of the non-bank lenders are able to offer low deposit home loans or will allow 2nd mortgages so you can get a home with a smaller deposit. Most of these non-bank lenders only offer home loans through selected mortgage brokers so you want to ensure that you deal with reputable brokers like Mortgage Link who are able to offer all the choices.

Create Your Budget

Create a budget to determine what you can realistically afford to spend on mortgage repayments. Your budget should include all your regular outgoing expenses along with estimates for the cost of ownership of a home (insurance, rates, interest on your mortgage, applicable body corporate charges and maintenance for your home). These costs will vary depending on where you live and the type of home you wish to buy.

You also need to be realistic and include additional regular expenses that might come up, like schooling, mortgage protection  cover etc and any lump-sum costs like repairs you want to do or furniture etc… Also consider what would happen if you went down to a single income for a period of time due to redundancy, pregnancy etc.

Use online budgeting tools such as those found on the Sorted website or use an online budgeting system like PocketSmith where you can set up a budget and more importantly monitor your spending to ensure that you stick to the budget that you set.

Use A Mortgage Calculator

Once you have worked out your budget, you can use a home loan repayment calculator to get an idea of what your mortgage repayments would be.

With the Mortgage Link calculator you select the purchase price and the deposit which calculates the amount of finance required. You then select the annual interest rate which we suggest you round up a little to factor in any future interest rate increases. Finally you select the term of the mortgage which can be anywhere up to 30-years, but again it is interesting to select a lesser term and see how the repayments differ.

Of course in most situations the repayment figure will be higher than you are used to paying in rent but the benefit is that instead of being an ongoing and increasing expense, your mortgage repayment is paying off the home loan so that one day you will own your home freehold; that is with no home loan.

With your budget you can work out what you can afford to pay each month and thus determine the mortgage that you can afford. Be careful to be realistic with any budget and consider all those “one-off” expenses that are often forgotten.

It is then time to start looking at the actual finance approval. If the figure is a little higher than you are comfortable with then you may want to speak with a mortgage broker about ways to reduce the repayments (like paying interest only for a period of time, consolidating other debt or finding a lower interest rate) or increasing your household income to compensate.

Increasing income can often be done where a property has space for a boarder, a flatmate or student, where there might be some welfare assistance or you could look at doing extra hours, a home business or a part-time job.

Pre-Approved Home Loans

Most people will approach the bank to get finance pre-approved and therefore you will know what price range you can look at for your new home – or so people think.

The problem with going directly to the banks is that you are presented with just the options that the particular bank offers and this may even mean that you are told that you cannot get a mortgage for the home you want.

Today people are learning that the better option is to approach a mortgage broker who has knowledge and access to home loans from a variety of lenders and can therefore usually find a home loan to suit.

About Mortgage BrokersNew Zealand mortgage brokers

Mortgage advisers can help you find the best options and the best deals from the banks and non-bank lenders to suit your individual needs.

Your first home is one of the most significant investment decisions you will make and you want to make sure that you know the different ways you can structure your loan and what the different lenders will offer you.

There are many mortgage brokers in New Zealand, but you want to ensure that the mortgage broker ill work in your best interests which means they should not be owned by bank or real estate company and needs to have the choice of lenders for you.

You will find that mortgage brokers like Mike Pero, Roost, New Zealand Home Loans, Mortgage Express and others are owned by banks or real estate companies, whereas others like Mortgage Link are independently owned by the brokers who operate as mortgage brokers.

Of course, I work as a mortgage broker for Mortgage Link.

Financing Your First Home

Banks and other lenders want to provide finance for you, but also have to go through a process to ensure that you are deemed a good risk.

They mainly look at four areas;

  1. Your Deposit – this shows how much money you are willing to invest in your new home and the higher the amount the less risk to the bank or other lender.Along with your savings, there are other sources that can help to supplement your first home deposit; KiwiSaver offers first home buyers the opportunity to withdraw their savings and KiwiSaver members should also look into the scheme’s deposit subsidy. Family are often also able to help, but you need to be careful with how the money is provided and the paperwork used especially if there are guarantees.
  2. Your Income – you need to be able to afford the mortgage repayments both now and in the future even if interest rates increase. For this reason banks and non-bank lenders look at how you receive income and then assume a higher interest rate to assess affordability. All the banks and lenders have a slightly different way of calculating this and therefore while one bank might say you cannot afford a certain level of home loan another bank may be happy to give you that amount of lending.Some of the more professional mortgage brokers have the banks assessment tools built into their own assessment software which makes determining the right lender much easier.
  3. Your History – it is important that you do not have any ‘bad credit’ which is based on past lending and payment of bills. Banks and other lenders will do a credit check with Veda and most of the better mortgage brokers  will pre-empt this and do a credit check first so that any issues can be addressed. Sometimes there are reasons why there may be something on your credit check and if addressed and explained at the outset you have a better chance of getting an approval.
  4. The Property – the banks and lenders do not treat all properties the same. There are some areas of New Zealand where they will limit the level of borrowing as they deem it too hard to sell the property, and then there are certain styles of properties that they are not keen on especially anything that could have a weather tightness issue.

Bank staff will collect all this information and send it away to the credit assessment team within the bank to get an approval. It is often better to have a mortgage broker to do this for you as they have access to more choice and are typically able to present your application better which gives a better chance of a positive outcome.

Lifestyle 001Finding Your New Home

It may seem like the easy and fun part now that you’ve got your finances sorted and know how much you can afford to invest in your first home, but it can often be hard to find your dream home within the budget.

There are individual real estate company websites but the more popular way of searching online for property is suing websites like Trade Me or RealEstate.co.nz which have listings from all of the real estate companies and private sellers.

At times houses will be for sale by negotiation or going to be taken to auction and therefore it is more difficult to determine the value from which you can make an offer. In this case you may want to get a registered valuer to assess the property or some mortgage brokers have access to software and can provide you a report of recent sales in the area so you can make a more informed decision.

A real estate agent will be able to assist you with the process of purchasing your new home and both a mortgage broker and your solicitor can assist with advice.

It may seem like a lot of stuff, but most people agree that home ownership is a good thing for the whole family and therefore we believe it is worth making the effort.

 

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