Four property lending options for your next move
Property lending can look very different depending on where you are in life.
You may be buying your first home, reviewing a mortgage that no longer fits, growing an investment portfolio or trying to coordinate the sale of one home with the purchase of another.
Each move comes with its own numbers, timeframes and lending requirements. Understanding these early can help you set a realistic budget, avoid rushed decisions and find a mortgage structure that supports what you want to do next.
Here are four property lending options we can help you navigate.
1. Buying your first home
Buying your first home is exciting, but there is plenty to understand before you begin making offers.
A lender will usually assess your income, regular expenses, existing debts, deposit, account conduct and overall ability to manage the proposed repayments. Different banks can also assess the same application differently, which is one reason the right lender matters.
If you have been a KiwiSaver member for at least three years, you may be eligible to withdraw most of your savings to help purchase your first home. You must generally leave at least $1,000 in your account. You can check the current KiwiSaver first-home withdrawal requirements through this link.
Before you start viewing homes, it helps to understand:
How much you may be able to borrow
How much deposit you will need
If you may qualify for a low-deposit home loan
What your repayments could look like
Which documents you need to prepare
What conditions could be attached to your pre-approval
A mortgage pre-approval can give you an estimated borrowing limit, but it is still subject to the lender’s conditions and approval of the property you choose. It also has an expiry date, so the timing of your application matters.
We help first-home buyers understand their position, prepare their mortgage application and compare suitable lending options. Once you find a home, we can also work alongside your lawyer and other professionals to help keep the finance process moving.
2. Refinancing your mortgage
Refinancing means moving your mortgage from one lender to another. Restructuring means changing how your home loan is arranged, sometimes while remaining with your current lender.
Both options can be useful if your life or financial position has changed since your mortgage was first set up.
You may consider reviewing your mortgage if you want to:
Access a more suitable interest rate
Change your repayment structure
Pay your mortgage off sooner
Reduce pressure on your regular cash flow
Consolidate other debts
Access equity for renovations or another goal
Move to a lender that better suits your circumstances
The lowest advertised interest rate does not automatically make refinancing worthwhile. You may need to consider fixed-rate break fees, legal costs, valuation fees, cashback conditions and the features you could lose by changing lenders.
Extending your loan term could reduce your regular repayments, but it may increase the total amount of interest paid over time. This is why it is important to compare the immediate benefit with the longer-term cost.
When reviewing a mortgage, we look at how the loan is structured as well as the lender and interest rate. Depending on your circumstances, this could include fixed and floating portions, offset accounts, revolving credit or changes to your repayment frequency.
You can also read Sorted’s guide to refinancing a mortgage for more general information about the process.
3. Buying an investment property
Buying an investment property involves more than confirming that you have enough equity for a deposit.
A lender may consider your income, existing mortgage, other debts, proposed rental income, living expenses and ability to manage repayments if costs increase or the property is temporarily vacant.
Equity is the difference between a property’s value and the amount owed against it. Your total equity and your usable equity are not always the same, as lenders may limit how much of that value can be used towards another purchase.
Before buying an investment property, it helps to understand:
How much usable equity you may have
Your current borrowing power
How proposed rental income may be assessed
The deposit requirements that may apply
How another loan could affect your cash flow
How the lending should be structured
What happens if interest rates or expenses increase
Loan-to-value ratio and debt-to-income restrictions may also affect the amount a lender is willing to provide. These rules and individual bank policies can change, so borrowing power needs to be assessed using your current financial position.
A good investment lending plan should consider more than the next approval. The way your loans are structured can affect future borrowing, financial flexibility and the separation of personal and investment debt.
We help property investors understand what may be possible, compare lender requirements and create a lending plan that accounts for both the next purchase and their longer-term goals.
Tax and ownership structures should be discussed with an accountant and lawyer before making a property investment decision.
4. Buying and selling a home
Buying your next home while selling your current one can create a timing puzzle.
You may need to decide if you should sell first, buy first or make an offer that depends on your existing home selling. The right approach will depend on your equity, income, risk tolerance and the conditions of the property market.
Selling first can give you certainty around the money available for your next deposit. It may also mean arranging temporary accommodation if you do not find another home before settlement.
Buying first can help you secure the home you want, but you need a clear plan for managing two properties if your existing home takes longer to sell.
Bridging finance may be available in some situations. This is short-term lending designed to cover the gap between purchasing a new property and receiving the proceeds from your current sale. Approval will depend on the lender, your financial position and how the existing property sale is progressing.
Before buying and selling, it is useful to know:
How much equity you have in your current home
What your next purchasing budget may be
If you could manage two mortgages temporarily
If bridging finance could be an option
How sale and purchase conditions may affect finance
How to coordinate deposit and settlement dates
Growing families, relocations, separations and changes in lifestyle can add another layer to the decision. We help you understand the lending side early so you can assess your options before committing to a sale or purchase.
Find the lending option that fits your plans
You do not need to know which bank, loan structure or application pathway is right before speaking with a mortgage adviser.
A good place to begin is with the move you want to make. From there, we can review your current position, explain the options available and help you understand what needs to happen next.
If you are buying your first home, refinancing your mortgage, purchasing an investment property or buying and selling, talk to Tussock Financial about building a lending plan around your next move.
This information is general in nature and does not constitute personalised financial advice. Lending criteria, fees and eligibility requirements apply and can vary between lenders.
