Home Loan
Unless you have hundreds of thousands of dollars cash available to buy a house, there is a good chance that when you are looking to buy a house you will need to borrow money to buy a house. In order to borrow money , you will need a lender which can be a bank or a non-bank to assist you with the loan. This loan is called a home loan. In return for the loan to buy the house, bank will ask you to sign a legal contract called a Mortgage contract which lays down terms and conditions for the given home loan. It will also state who the borrowers are, what the interest rate and loan repayment amount will be; how long the loan is for ( maximum loan term in New Zealand is 30 years).
In order to offer you a home loan, the lender will check your credit worthiness based on some key attributes. ABCDE of what a bank looks for in an eligible candidate:
- Age and Stage– someone looking to buy their first home at 60 will find it difficultto borrow on a 30-year loan term as they are likely to retire during the term of the loan.
- Base salary– Income for an employee or profit for the self-employed is a key to measureyour ability to service the loan. To service the loan, you must have sufficient income to support your living expenses plus additional funds to service the new home loan
- Credit character– bank wants to ensure that the borrower will repay the loan back on time andon the agreed terms. They will check your credit score and if there were any adverse remarks, unpaid loans, unpaid fines, overdue credit cards or unarranged overdrafts or account arrears that have not been paid on time.
- Deposit – This ensures that the borrowers have some skin in the game and are not completely relying on the bank for the entire loan. It also shows that they are good savers as they usually would have saved some of that money themselves. Deposit can be made up of savings, Kiwisaver and family gifting. It can also come from sale of any assets like a business, vehicle etc. Banks prefer that borrowers put 20% of their own money as a deposit. However, banks can loan upto 90% and in some cases can loan up to 95% and put just 5% money.Talk to us about 5% deposit loans
- Employment– where you work and what you do will tell the bank whether you hold a stable job and a regular income. If you lost your job, how difficult would it be to find another job with your skills. It may be difficult to employ a nuclear scientist in New Zealand as we do not have any nuclear facilities. I once worked with a successful, classical singer who had a successful career in her country but was finding it very hard to find a job here.
- Talk to us if you want to find out your eligibility for a home loan.
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