Guide to Mortgages
Sometimes known as finance or just plain money! Welcome to the Propertytoolbox guide to mortgages and home loans.
What is a mortgage?
A mortgage is use of a house or property as security for a loan. The money is usually lent by a large financial organisation such as a bank, the loan is usually over a long period of time (25 - 30 years) and the fact that the house is being used as security for a loan is noted on the title of the property. The note on the title means that the house cannot be bought or sold without the mortgage being addressed.
Do I need a mortgage?
Unless you have enough money in the bank to buy a house outright, you will need a mortgage; the reality is that most of us need mortgages.
How much can I borrow for my home loan?
This depends on many factors, not just your income. Things that can affect your ability to get a mortgage or a home loan and the amount you can borrow are:
- Children (or dependants)
- Work history
- Credit history
- Savings history
- The amount you have available for a deposit
- The limits on your credit cards
- Hire purchases (HPs)
- Number of cars you own
- Residency status
- Current loans (including student loans)
- Other mortgages
Most banks have 'how much can I borrow/afford' calculators; Westpac's and ANZ's calculators are good places to start. These calculators are just a rough guide, and in most cases over-estimate the amount you can borrow for your home loan so don't rely on an online calculator to give you your house buying budget.
Ultimately you are going to need to talk to someone, so choose a couple of lenders and make contact, better yet, save yourself time and money and get the experts in - contact a mortgage broker.
How do I get a mortgage?
A good place to start is your current bank's website. Most banks have information about mortgages and 'how much can I borrow/afford' calculators.
If you are after a competitive deal, you can start by checking out all the banks' interest rates. The website www.interest.co.nz is great for this.
Start by ringing your bank or a mortgage broker and outline your situation. If you are happy to progress after these initial discussions it is a good idea to go and see them in person.
You will need to prepare a pack of information about yourself. It will include at a minimum - proof of identification and pay slips (or proof of income) for up to 6 months. There is a lot of paperwork involved in mortgage applications, so be prepared! You may be required to provide all sorts of information ranging from 3 months worth of transactional bank statements, to business accounts, and even proof of residency.