Posts Tagged ‘Banks’

Insuring Your House Before Settlement

Before you even can settle on your new home you will need proof that you have house insurance. Why? In most cases you need to borrow money off a bank to buy, your bank is using the house as collateral for the loan and wants to make sure that if anything unexpected happens to the house there is insurance to cover it – they are protecting their collateral! Therefore your bank will require house insurance as a condition of your mortgage. Get your insurance organised well in advance when buying a house and get your insurance company to send a certificate with proof of cover to your lawyer. The settlement day process, and drawing down of your mortgage, cannot be done if this proof of insurance document is not available. Insurance can be a bit of a minefield and it really pays to shop around and to read the fine print of each policy carefully before choosing. Things such as market value replacement, versus sum insured replacement should be fully understood and what is covered and not covered should be worked out. What kind of insurance you choose to take out is ultimately a personal choice. The consumer website has the most comprehensive information on insurance, and even compares policies. Gradual damage is an interesting part of insurance, and it can be a real surprise as to the level of cover for this you have in your policy. Here is a great article about gradual damage and insurance. Cost of insurance can vary widely and it is a good idea to find out what insurance is the best value for money. Lately insurance premiums seem to have gone up hugely, so it may be a good time to look around at someone other than your current insurer. With insurance, the cheapest insurance is likely to be inadequate when it comes to insuring your home – so make sure you know what you want/need in your insurance policy and choose one that gives you this. Like with many things, putting some time and effort into getting familiar with house insurance will mean you don’t get any nasty surprises and you will know what you are paying for. Are you about to settle on a house? The settlement section in the Propertytoolbox house buying guide has all you need to know.

Should I Fix or Float My Home Loan? Some Tips…

With talk of interest rates going up soon, this is a hot topic. Here at Propertytoolbox we have some advice and tips on how to make this fix/float decision. If you are after info on just what fixing and floating is - check out our structuring your home loan advice.

The best places to go to be assured that you are taking the advice of people who have all the facts at hand, and all the best brains working on the fix/float question, is banks' websites and sites such as Economic reports and commentaries by banks' chief economists are a great source of information and will give you the information you need to be able to make a decision. Speaking to a mortgage broker can also be a great help - they have access to the most recent information,  and you can discuss your own situation with them to get the most relevant advice - usually for free! You can organise a chat with a mortgage broker here.

While all the major banks publish their own reports, a favourite of ours at Propertytoolbox is the BNZ Weekly Overview. This report comes out weekly and has a section tailored to residential borrowers called 'If I was a borrower what would I do'. The National Bank also has a good report tailored to the property market.

When deciding about structuring your home loan it is always best to gather information from a number of sources - then you can be assured that you are getting the full picture - or as close to it as you can given that nobody can predict the future.

Borrowing is a personal thing and you have to make a decision based on your own personal circumstances. If you are planning to sell your house, or are expecting a windfall then fixing may not be a good option as you may get charged large break fees when you pay off your loan. Also, if your circumstances mean that your finances cannot handle an increase in mortgage repayments then having large amounts floating or on very short term fixed may be too risky.

Here are some questions to ask yourself that may help you to decide:

  • Are you likely to have any extra money that can go into your mortgage - a large amount or small amount here and there?
  • Are you likely to move house - What are your plans for the next few years? Do you have plans to move on? Might you have to move for your job? Is your family growing? Might you go overseas?
  • How do you feel about risk? - Would you rather know exactly what you repayments are going to be or are you happy with some variability.
  • Current mortgage interest rates - Are interest rates on their way down or up?
  • What are the experts saying?

When it comes down to it, nobody really knows what is going to happen in the future with mortgage interest rates. There are a lot of factors involved and the New Zealand and global economy all have an influence.

If you feel that you need help with this decision, then talking to a lending specialist at your bank, or a mortgage broker is really your best option. Not sure about mortgage brokers? Find out just how mortgage brokers work here.