80% lending possible

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Hi Everyone

WOW, all these changes, hard to keep up with.

Recently I listed a property to sell that I have owned for 15 years. The Real Estate asked how I had come by the ‘wealth’ to purchase the property. This info is needed with regard to the Anti Money Laundering Act (AML).

I was stunned, as I said to him, I keep records for 7 years for the IRD, the AML act was not even thought of 15 years ago and I didn’t intend to pay my accountant to dig back that far. I explained where the deposit had come from and that in the intervening years I had subdivided it into 3 titles and time had done the rest in the price increase. I would sell privately if that wasn’t acceptable. They ran it past their compliance Dept and this explanation was luckily accepted. I could understand someone having to explain how they wanted to buy a property with a large amount of $$ as part payment.

Banks reduced LVR to 60% for investors

However, I have access to a good non-bank lender (2.99% over 2 years for prime customers at the moment) subject to approval of course 😊 who can still do 70% until May this year. They can still lend 80% over both an owner-occupied and investment property if they finance them together. This will not change, it’s one of their products.

Client buying a property for daughter

This client was buying in his own name, the daughter was giving him some money toward the deposit. The daughter and partner couldn’t prove sufficient income to qualify to borrow and buy the property in their names. I pointed out that they would need to find a 20% deposit when they came to buy in their own names plus the client would be liable to pay tax on the profit under the 5-year bright-line test.

He mentioned that he was selling at a cheaper price but, as I pointed out, he would need to have a valuation done and the tax would potentially be based on the profit made between his purchase cost and the valuation regardless of what he sold it for.

There is a smarter way to do this without those challenges. He ran what I advised past his lawyer and accountant and they both thought this was a great way to go around it. Do you want to help your family and avoid these challenges? Call us.

Pre-approvals

Banks are taking a long time for approvals. If you are looking at buying it is advisable to have a pre-approval in place. Pre-approvals can stay current for up to 90 days (depending on the bank) and can be extended for a further period. This gives you plenty of time to look around.

Once you find a property you are interested in then you can let us know the address, the proposed purchase price (and a rental appraisal if an investment property) then the bank can confirm the property as being acceptable to them. This way you can offer an unconditional agreement which puts you in a much stronger position to negotiate.

Mortgage rates? Up or down?

Rates are still expected to stay as is or perhaps reduce very slightly. Some of the info coming through suggests that rates might start to increase next year, however, that is crystal ball gazing and none of us knows exactly what the market or rates will do. It might be worth considering only fixing for a shorter term and if it starts to look like rates are going to rise, then lock in for longer.

Healthy Homes Act

Might it be worth selling an older property that might be difficult to make comply to the new Act? Prices are good and some investors are now looking at new homes, even off the plans, rather than an older investment property.

Are you needing some unbiased advice regarding finance? We work with first home buyers, refinancing, consolidating debt, construction finance or business finance.

Call us on 021 667 212