If you’re thinking about applying for a mortgage, it’s worth getting the advice of a mortgage broker – in this article we’re going over some of the basic things to know before you start your application, to give you an idea of the questions you should be asking.
Are all banks the same?
The short answer is no, all banks are not created, nor run equally.
While it’s true you can complete your own research with the major banks in the market place, not all of them offer their best deals directly to the market. As cynical as it sounds, at the end of the day, banks are in the business of making money just like any other business, and this means they don’t always have their client’s best interests in mind.
Even if they say that they have low interest rates for new lenders, or special fixed rates, there may be a hidden catch involved. In the past, banks have tried to ‘scare’ people into thinking if their mortgage is with them, they need to have multiple products with them as well, such as credit cards, KiwiSaver, and Insurance, but this isn’t necessarily true.
It’s also important to remember that every bank has different rules and regulations around who they will allow to have a mortgage. Some require a 20% deposit, while others require a 10% deposit, but this isn’t always easy to find out. These rules can change between new-builds, existing homes and apartments, and these are just a few of the variables to consider.
As with every industry, those who work and live in it every day tend to know what the market is doing better than most. Mortgage brokers have the knowledge and ability to negotiate with not only the banks, but non-bank lenders too, while keeping a client’s needs at the forefront. Knowing where the fishhooks may lie before anything is signed is the best way to avoid them.
When you are applying for a mortgage, one of the final requirements is to have house and contents in insurance, and life insurance is highly recommended, but why is this?
This is for peace of mind of all parties involved, both the homeowners and the lenders. Home and Contents Insurance protects homeowners a great deal, as if anything happened to your home – such as a flood or a fire – you are able to rebuild again!
It also gives the lender peace of mind in knowing that if anything were to happen to your asset (home), they would be able to still get the value of the loan back. If your home was to flood, or have a fire, then a replacement home could be built, and if you were to sell the home then the bank loan would be paid off.
Life Insurance on the other hand is a little different. Having good life insurance before taking out a mortgage is entirely for the benefit of the homeowner. Essentially, if you were to become sick or die, the bank would be able to sell your house in order to have their loan paid back. The bank is covered but your family may have their lifestyle completely changed. Life Insurance ensures that you and your family are protected, not the bank.
Self-Employed Mortgage Applications
When you’re self-employed, the requirements for a mortgage application are typically the same, but the evidence required to prove your financial state to the bank can be more difficult to get hold of. That said, it’s still possible.
Sometimes, being self-employed can mean that your income will be less stable than those on a salary. Many banks are wary of this, as is means they are less assured of having their loan paid back. Some banks subsequently make it more difficult for those making applications for self-employed mortgages.
Thankfully, there are a number of newer lending groups that offer credible and verifiable options to those who are self-employed. Brokers such as Rethink Group can help – we understand finances, and have the skills to put you in contact with the banks who do accept self-employed income.
What else do I need to know?
The best way to approach a mortgage application is with help. Here at Rethink Group, we have the skills and experience to help guide you into your first home, without worrying about dealing with the bank. We’re here to help – contact to us today.