The Mackies have a team of experts we like to call on to help our clients get the information they need. It’s all part of helping you to enjoy the best sale or purchase experience.

Today, we’re talking to Nicholas Schnell from Mike Pero Mortgages about moving into a bigger home. If you want reliable advice and help structuring your home loan to meet your financial goals, call Nicholas today on 021316131.

Q: I’m planning to buy a bigger home - is there a right way to manage my home loan as I change properties?

When you move home, you can either keep your home loan or start again - whichever suits your situation.

To keep your home loan you’ll need to change the security (the property) associated with the loan and (if needed) add a new “top up”. If you decide to pay it off and start afresh, it’s important to understand any penalties that may apply.

If your loan is fixed you will need to pay “recovery costs” or “break fees” to break the existing loan. If you were given a “cash contribution” when you took out the loan, you might have to pay it back if you are within the specified time frame e.g. 3 years.

Also, bear in mind you will have legal costs to move your home loan between providers. Try to see if your new provider will help you to offset these costs with an upfront cash payment.

It’s worth asking an expert to help you to understand the cost of moving against any potential savings.

Q: Do you have any tips for setting a budget for my next home?

Put aside just over $3,000 for lawyers fees, valuation and builder report (hopefully your bank will help cover some of these costs).

It’s important to be clear on what you can afford and calculating your repayment and living costs is a big part of that. I sit down with all my clients and help them to work out a budget that ensures they can afford to make repayments once they increase their home loan. I often recommend my clients start living with the new budget straight away as it’s a great way to test what you can afford.

Q: Are there any changes to lending criteria in the market due to COVID-19 that could impact my ability to borrow?

You need to make sure you have a good deposit, the ability to repay the loan, and that you can demonstrate you can manage your money effectively. Using a broker like myself can be a handy way to assess your position before you speak to a lender. I help all my clients pull together the right information to make the application process easy.

Q: There seem to be some very low interest rates in the market - how will these impact our house buying budget? Will we have more money to spend now?

Banks still want to know that you can comfortably repay the mortgage. Even though interest rates are expected to stay low for a few years, banks will test your ability to manage if rates increase. The most important thing is to create a realistic budget and be sure that you can manage your repayments and your day to day living expenses. I can help you to review your position and pressure test it for any possible interest rate increase in the future.

Q: Hawke’s Bay can be a competitive market - what are your tips for making sure we can move fast to secure a property?

Get your finances pre-approved or at least talk to your mortgage adviser so you know what your limit will be, then be decisive when you find something you like, and get an offer in. Talking to an experienced real estate agent can be a good way to manage your price expectations. You can also limit your conditions by doing some of the due diligence before presenting the offer if you have time.

Q: Is it possible to get a conditional finance approval if you need to sell your existing home before you move?

Yes, it is, and this is quite common.

Q: What factors might impact our ability to borrow as much as we want for our next home? How should we manage these to get the maximum budget for home shopping?

The biggest factor is short term debt because it takes away servicing capacity. The bank assumes that if your money is locked up in short term debt repayments then it’s going to be harder for you to pay off your home loan.

I recommend getting rid of short term debts or staying away from them. You can also think about reducing credit card limits. Finally you can protect your credit position by always paying your bills on time and making sure there’s always enough cash in your bank account for automatic payments to go out.

And finally…

Asking for expert help is a smart way to make sure you get what you need from your finance. It also frees up your time to focus on the process of finding a home that suits your needs. Give me a call and I can help you to get your finance sorted and guide you through everything you need to know.

What you need to know: upgrading your home and your home loan