Finance and Home Loans FAQs
What is my borrowing power?
Borrowing power is the amount of money you are able to borrow - and is sometimes also known as borrowing capacity. This can differ from lender to lender, but is generally measured taking your whole financial situation into account.
This can include your income streams - which may consist of your salary, KiwiSaver (if you are a first home buyer) any government assistance you may receive and investment properties you might have - as well as your expenses. This includes any other personal loans in your name, as well as your current rent and any other outstanding balances, such as credit cards.
Your lender will assess all these factors and then confirm how much they would lend you.
What is a redraw facility and why might I need this?
Redraw is a facility on your home loan account that allows you to make additional payments - and then access these extra funds as and when you need them.
This has two major advantages. A redraw facility allows you to make extra repayments, which could save you money in interest costs. It also provides flexible access to this money if you require it.
What is an offset account and why might I need one?
Offset accounts allow you to build savings that can help to reduce your loan principal over time. This may allow you to build up equity or pay off your loan faster.
Offset accounts are a type of savings account where the balance is offset daily against the loan amount - any 'notional' interest earned on the balance of your loan is offset against the interest you would normally pay.
What is lender’s mortgage insurance?
Lender’s mortgage insurance acts to protect the lender in the event that the borrower is unable to make their mortgage repayments.
If the amount borrowed is above a certain figure - usually 80 percent of the lender's valuation of the property - the borrower must pay LMI premiums.
Some lenders will allow you to add the LMI to your home loan, while others require it to be paid up front.
As a general rule, if you do not have at least a 20 percent deposit you will incur an LMI payment.
What are lender's fees?
Fees can vary between different lenders. They include any amount of money that might be incurred by the borrower - from pre-purchase and buying the home until the relationship comes to an end.
In the beginning these fees might include those related to the original application, valuation, or solicitor and legal correspondence.
During the home ownership, the borrower may be required to pay extra for services such as redraws, additional repayments, deferred establishment, loan variation and monthly or annual fees.
What kind of lender's fees may apply?
You'll find that fees can vary from lender to lender, but there are a few common charges that may be applicable to your transaction.
These can include application or establishment fees, legal or solicitor's fees, settlement fees and legal disbursement.
Other fees you may come across include monthly or annual charges, deferred establishment fees, additional repayment charges and valuation fees.
You will want to speak with your lender and ensure you have a comprehensive understanding of all fees and charges before you proceed.
What is a guarantor?
Your guarantor is someone who allows the equity in their own property to be used as additional security for your loan. In essence, this means that in agreeing to be your guarantor, they are agreeing to repay your loan if you are unable to.
When someone acts as your guarantor, the lender will take a mortgage over their property. While this does not support your loan directly, it is used to support a guarantee from your guarantor.
Why would I need a guarantor?
Guarantors are not needed in all cases, but in certain circumstances they may be required. For example, you may not have enough deposit saved, or perhaps your lender is concerned about your ability to service the loan.
For first home buyers, a popular option is to have one or both of your parents act as a guarantor - this means that they allow the equity in their property to be used as further security for your loan.
What is refinancing?
Refinancing can be a great way to manage your money and may turn out to be a smart decision in the long run. In fact, you might find you are able to get lower fees, save a considerable amount of money and in some cases, even shave years off your current loan.
Whether you are working to pay off or consolidate existing debts, looking for additional cash, planning a renovation project or simply seeking a cheaper rate, we can work with you to find a mortgage that works with your lifestyle.
Why would I refinance my mortgage?
Refinancing could be a smart option if you are looking to manage your money - often times this can lead to better rates or lower fees. You may also find that this can save you money - and sometimes even years off your current loan.
Popular reasons to refinance your mortgage include property renovations, saving money, looking for a cheaper rate, or consolidating or paying off debts.
What is a bridging loan?
A bridging loan is a type of financial product that lets you purchase a new property even if you have not yet sold your current home.
This type of short-term loan is available for a period of less than half a year if you are selling an existing home, but may be valid for up to 12 months if you are building a new property.