Recent learning’s about finance you all need to know.

1. Recent learning’s about finance you all need to know.

2. The other day I attended an information evening where we learnt all about the finer points of finance that a lot of people don’t realise. Here are a few that might affect you. 1. The most important thing when getting finance is not the cost of the borrowing but ensuring you have the correct loan structure. A lot of mortgage brokers now days are pushing everyone towards Sovereign because it means they get a better pay day, however they could be setting you up to fail in the future when you go to buy another property. The more properties you buy, the lower the LVR you need.However Westpac will allow you to have two properties at a 90% LVR, therefore it could be smarter to buy your first couple of properties through Westpac to make the most of their LVR policy.

3. Leaving a footprint 2. Every time you go shopping for credit the lender checks your credit history. This leaves a footprint. Therefore if you go to ASB, ANZ, and Westpac trying to get loans at varying amounts or varying interest rates then by the time you get to Kiwibank, they check your credit and they ask themselves, ‘well why didn’t the other banks approve the credit’ and thus may choose not to give you the credit either. It will then take a further 3 months for these footprints to become irrelevant.

4. Migrant bankers 3. It was told to us that Migrant bankers actually have more authority over the credit team than a normal banker. Migrant bankers are not only for Migrants and therefore it could be a good idea to use one if you are having trouble getting that finance. A Migrant banker can tell the credit team ‘I think you need to have another look at this application’ where as a normal bank just accepts what is given to them.

5. Low Doc Loans 4. Low Doc loans are returning to the market place. They are not the same product as Pre GFC, and require 18 months proof of income. However there is a whisper of a new product coming onto the market that only requires 1 months proof of income, however this is only available through a mortgage broker

6. Capitalising interest rates 5. We discovered a product called capitalising interest rates. This product is for people who borrow to do developments or renovations etc and want to increase their cash flow. How it works is that the interest sits compounding, but is paid in one big lump sum at the end of the deal. This increases cash flow due to not having to pay interest monthly and can be paid when you have already on sold the property.

7. Current interest rates 6. Graeme Wheeler recently said that he would not be increasing interest rates at any time this year. It has been suggested that now would be a good time to lock in I.e. For 5 years while they are still low.However you should also stagger your interest rates to protect yourself having all your interest rates finish on the same day and then be faced with higher interest rates. I.e. On a $500,000 loan, lock in $200,000 for 2 years, $200,000 for 5 years and keep $100,000 as floating. This is called hedging your rates