Meet Andrew and Alycia,
They needed advice and assistance to purchase their first house!
The difficulty they had was needing to borrow over 80% LVR, due to having less than a 20% deposit and not qualifying for the Kainga Ora first home loan product offered by Westpac, SBS, TSB, Kiwibank, Co-operative and Unity.
Lending is hard to obtain as other banks are generally not open for lending business for new to bank clients if you don’t have a relationship with the bank. Or they don’t have the funding available due to Reserve Bank restrictions for clients outside the Kainga Ora scheme..
First home buyers are quite limited for options, and the only avenue available for Andrew and Alycia was to approach their own bank. However, their bank would only look at their application after they had made an offer on a property and had a signed and dated S&P agreement.
This is where they had to rely on Darrin’s expertise to provide them with feedback on their borrowing capacity. If they had a 20% deposit all banks would consider their application – but that wasn’t the case. Unfortunately, because they were outside of Kainga Ora requirements and needing over 80% borrowing, they couldn’t have a pre-approval in place.
Darrin provided them with a borrowing budget which allowed them to start placing offers on properties.
This they did, but their first offer fell over due to issues with the title, highlighting the importance of having the right conditions in the sales and purchase agreement . In this case, it was the Solicitor condition which potentially saved them a whole lot of heartache if they had proceeded with the purchase.
On their third property offer, they were successful! Then it was all hands on deck to submit an application and fulfil the approval conditions within the agreed days stated in the contract.
When a lender receives a “live deal”, in other words an application with a sales and purchase agreement, they treat it with priority. Andrew and Alycia received an approval very quickly which eventuated into an unconditional approval.
The next step in the advice process was to sit down with them.
The discussion was around their plans and the interest rate market to decide on a loan structure that best suited them.
An additional cost to over 80% borrowers is either a Low Equity Premium (LEP) which is a one off payment to the lender or a Low Equity Margin (LEM) which is additional interest margin added to the loan. This means that borrowing with less than a 20% deposit will cost the borrower more.
This Low equity margin can be removed when the borrower has 20% equity in their property.
Andrew and Alycia are very excited to own their first house and being able to host Alycia’s family when they visit from France.
Congratulations/ toutes nos felicitations and thanks for the opportunity to assist you into your first home.
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