First homebuyers would be the worst hit as the new regulatory environment where Banks are required to restrict their high Loan-to-Value Ratio (LVR) comes into effect on October 1, 2013. Banks would not be able to provide mortgage loans with less than 20% deposit and hence, with property prices skyrocketing, it would be difficult for many first homebuyers to accumulate 20% deposit.
In would be very easy to fall a prey to hopelessness and take some wrong decisions in such a scenario. Please discuss your situation with an Authorised/Registered Financial Advisor. Please do not give up and blow away your hard earned money on avoidable expenses.
I encourage you to keep saving towards the deposit. You may still be able to receive help and get finance on your low deposit at reasonable rates.
Lenders may still consider lending on low deposit but will assess on case-by-case basis, depending on other strengths/merits of the application.
Your good credit history, good account conduct, savings history and low debts position may get you across the line, despite a relatively low deposit.
Please remember the following Dos and Don’ts.
The Dos are: 1. Consider joining some savings scheme like Kiwi Saver, talk to an authorised adviser 2. Keep your account conduct clean of any dishonours and unauthorised overdrafts 3. Consider keeping your bills at a more frequently visible place until they are paid 4. Provide funds in the account before automatic payments and direct debits are due 5. Restrict impulsive buying; trying to keep pace with different products innovations is a race better lost 6. Keep checks on your credit history to minimum and defaults to Nil and 7. Talk to a mortgage broker; for instance, talking to us would not cost you anything.
The Don’ts are: 1. Blow away your savings on avoidable expenses 2. Accumulate small debts or credit cards 3. Buy big ticket items on your credit card unless you can repay in full at the end of the month 4. Forget to pay your bills on or before due date 5. Let your credit history be affected due to defaults or even too many credit checks 6. Let your automatic payments and direct debits be dishonoured; make funds available before they fall due or make arrangements. Lenders do not like dishonours or unauthorised overdrafts in your accounts and 7. Give up; you did not get help because you did not ask for it.
Rakesh Bansal is Director of Kiwi Mortgages based in Howick, East Auckland. His photograph was wrongly captioned in our September 1, 2013 issue. We regret the error.
