On the up: What will higher interest rates mean for real estate investors in New Zealand and further afield?
The Land of the Long White Cloud is shaping up to raise rates and the country may well be a bellwether for the Australia...
With the cash rate on hold for another month, one brokerage group believes first home buyers will become more prevalent in the marketplace provided they recive good advice from their broker.
According to Loan Market Group’s spokesperson Paul Smith, many first home buyers are keen to enter the property market but do not think they can for various reasons.
“Many Generation Y first time buyers who have minimal savings do not realise that they can get help from their parents or other family members, which can assist them in securing home finance,” Mr Smith said.
“This option does not come without conditions, including one that the parents’ property is preferably unencumbered. But with good equity, first home buyers can still borrow 100 per cent of the purchase price plus other associated costs without showing their savings history.
“In this situation, two loans are taken out. One loan is taken out at 80 per cent of the property value and is secured by the buyer and the second loan is taken out for the remaining 20 per cent, and is secured by the parents.
“The benefit of this option is that there is no requirement for lenders mortgage insurance. However it is important that in this situation, all parties are aware that in the case of default, the parents are liable for the 20 per cent they secured.”
Mr Smith said if first home buyers want to secure their dream home by themselves, some of Loan Market’s lending panel offer 95 per cent home loans, adding an additional credit card with the limit of $20,000 at home loan interest rate.
“This will effectively assist first home buyers to purchase a property of $400,000 at 100 per cent finance,” he said.
“In this situation, the lender does require the applicant to prove that they have saved five per cent of the purchased price in their bank account regularly in the last three months.”
Mr Smith said first home buyers should check with a mortgage broker to ensure they have investigated all their options and to obtain the home loan that best suits their financial situation.