### Lower Interest Rates

Interest rates are finally heading in the right direction after a period of steady increases. This is largely due to the Reserve Bank’s efforts to manage inflation and global economic factors influencing interest rates.

### Easier to Qualify for a Home Loan

The government has made it easier to qualify for a home loan by relaxing the Credit Contracts and Consumer Finance Act (CCCFA) regulations. This means lenders can take a more holistic view of your financial situation, increasing your chances of approval.

### What this means for you

- Lower Monthly Repayments: Enjoy more financial freedom with reduced mortgage payments.
- Increased Borrowing Power: Qualify for a larger loan to purchase your dream home or invest in your property.
- Potential to Refinance: If you have an existing mortgage, explore refinancing options to take advantage of lower interest rates.
- Faster Approval Process: Streamlined processes can lead to quicker loan approvals, saving you time and hassle.

### Understanding the Bigger Picture

To give you a better understanding of how interest rates work, it's helpful to know that banks fund their loans through a mix of deposits, equity, and wholesale debt. 

The cost of wholesale debt, measured by interest swap rates, has fallen significantly in recent months (see 1 year swap rate graph below). This is the primary driver of the decline in home loan rates.

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### Next Steps

Ready to take advantage of these positive market conditions? Book a [free, no obligations, chat](https://calendly.com/tella-advisors/chat-with-a-mortgage-expert-15min) with one of our home loan specialists today to explore your options.  

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Lower Interest Rates & Easier Approvals: Tella's here to help.

We're excited to announce the arrival of our newest member to the Tella family! 

Please join us in warmly welcoming [Jose George](https://www.linkedin.com/in/jkgeorge/) as our newest Mortgage and KiwiSaver Financial Adviser.

**Expanded Services at Tella**

Many of you know Tella as your go-to source for expert home loan advice. We're excited to share that we've expanded our services to include comprehensive KiwiSaver guidance. With Jose on board, we can now help you navigate both your home ownership and long-term savings goals.

**Meet Jose George**

Jose brings a wealth of experience to the table, having served as the General Manager of Canstar New Zealand and with a strong background in banking. His expertise will be invaluable as we continue to provide exceptional service to our customers.

**KiwiSaver Expertise**

Whether you're looking to optimise your existing KiwiSaver plan or just starting your savings journey, Jose can help you:
Choose the right KiwiSaver provider based on your goals and risk tolerance.
Develop a personalised savings strategy to maximise your future financial security.
Understand how KiwiSaver contributions can work alongside your mortgage plans.
Accredited with Milford, Pathfinder, Kernel, and Generate, Jose has the expertise to advise on a wide range of KiwiSaver options.

**Get in Touch**

Looking to discuss your home loan and KiwiSaver goals in one convenient place? Jose is here to help! Reach out to him to schedule a free, no obligations chat [here](https://calendly.com/jose-tella/chat-with-a-homeloan-kiwisaver-expert).

**Jose George**
 Mortgage and KiwiSaver Financial Adviser
 Email: jose@tella.co.nz
 Phone: 021 1405 293

Once again, a warm welcome to Jose! We're excited for him to share his knowledge and expertise with all of you. Please don't hesitate to reach out to Jose with any questions or to [schedule a meeting](https://calendly.com/jose-tella/chat-with-a-homeloan-kiwisaver-expert).

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Tella gets the Canstar treatment

_**Please Note:** This newsletter was originally published on 21st May 2024. While the information presented here may still be valuable, some aspects may be outdated._
 


**Cash Bonus for Staying Put:**

Did you know you could potentially receive a cash bonus for simply keeping your mortgage with your current bank? This could be a great way to get a better deal with your bank (and cash in your pocket!), without actually having to refinance.

While the specifics vary by bank and loan size, the banks are offering up to 0.90% of the loan amount for new customers. For existing customers, it's typically around 0.50% to 0.70%, taking into account the fact that you avoid refinancing costs like legal fees or valuations by staying put.

Here are some client examples: Last week, three of our clients received cash bonuses of $3,100, $5,000, and $7,540 for staying with their current banks.

Think of it as a thank you for your loyalty, and an incentive to stay for another 3 years!

**How It Works (The Simple Version)**

The specifics can vary depending on the bank and your loan details, but here's the general idea:
If you've had your home loan with your current bank for 3+ years and are out of the original contribution timeframe, you might be eligible for a cash payment.
The amount typically isn't as high as new customer incentives, but it can still be a significant amount of money.
Best part? You don't have to deal with refinancing costs like legal fees or valuations.
Tella Wants to Help You Find Out

There is one bank out there pre-empting and offering upfront. Others you have to ask. So if you have been loyal to your current bank for 3-4 years now with your home loan, it wouldn't hurt to ask and have some extra cash in your account at the moment.

At Tella, we believe in informed decision-making when it comes to your home loan. Whether you're a new borrower or a loyal customer looking for the best deal, we can help you navigate the options.

We're happy to do the legwork for you and help you maximise your savings!

**P.S.** Remember, bank incentives and offers can change frequently. This email provides a general overview as of 20th May, 2024.

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Want free cash to stay with your bank?

Are you keeping an eye on those 'special' interest rates your bank offers? Or if you’re a first-home buyer, are the rates you see online reflective of what you'll actually get? Let's dive into the world of bank interest rates, negotiation, and finding the best deal for your home loan.

Just like petrol stations adjust prices daily based on costs and exchange rates, banks also tweak interest rates regularly. While they might not update their website daily, you can often negotiate for better rates behind the scenes, especially during significant shifts like an OCR update.

But how do you know you're getting the best deal? It's not like you haggle over interest rates every day, right? This is where having an adviser comes in handy. They're plugged into the latest rate offerings, receiving weekly updates from banks, and can help you navigate through all the rates and offers.

Does a small rate difference matter? Absolutely! Let's crunch some numbers. Take a $500,000 home loan over 30 years. A 0.20% difference can save you $15 per week, adding up to $780 a year. Over the entire loan term, that's a whopping $23,400 in savings. And if you really want to get ahead and channel those savings back into your loan, you could shave off up to 18 months from your loan term, saving around $36,000.

Now, for first-time home buyers, understanding the intricacies of interest rates can be daunting. Factors like deposit size and the chosen bank can significantly impact the rates you're offered. Banks often apply Low Equity Margins or premiums for deposits less than 20%, which can catch you off guard if you're not prepared.

To understand more about bank fees and interest, visit our website [here](https://tella.co.nz/home-loans-mortgages/first-home-buyer/home-loan-mortgage-interest-fees). Our guide breaks down these charges, explaining what they are and what they're for, ensuring you're fully informed as you navigate through your homeownership journey.

**Ready to explore the best rates in the market?**

Simply email us at hello@tella.co.nz, with your bank name, and we'll provide you with the lowest rates we're seeing this week. Knowledge is power when it comes to securing your dream home, and we're here to arm you with the information you need.

Got questions or need assistance? Don't hesitate to reach out to our team. We're here to support you every step of the way.

Here's to finding the perfect home and securing the best possible home loan terms!

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Home Loan 'Special' Interest Rates

_**Please Note:** This newsletter was originally published on 8th January 2024. While the information presented here may still be valuable, some aspects may be outdated._

Achieving your homeownership goals begins with strategic planning. Here are some key steps to consider:

_**1. Budgeting Matters**_:

Keep a close eye on your spending and consider setting aside money each month in a separate account. Showing you’d have the income to cover essential expenses like rates and insurance can strengthen your position when applying for a home loan. Clearing credit card debts and discontinuing laybuys or afterpays is a smart move.

_**2. Assembling Your Team**_:

Engage with professionals who will be crucial to your journey:

_Home Loan Adviser / Mortgage Broker_:

Selecting the right professional is vital. Our advisers understand that not all homebuyers have the same needs. Whether you're building a home or working with a 5% deposit, our team guides you through various options, explaining why a particular bank suits your unique circumstances. It's worth noting that advisers are compensated by the banks when you secure your home, so there's no additional cost to you for the invaluable support they provide.

_Real Estate Agent_:

Beyond the traditional role, some agents go above and beyond. Collaborative agents can streamline your experience by showcasing homes from other agents’ listings, making your home search simpler.

Securing pre-approval and understanding your borrowing limit adds another layer of advantage. By reaching out to agents with this knowledge, you can inquire about upcoming listings in their area that may not have hit the market yet. This proactive approach positions you to be among the first to explore and potentially secure these yet-to-be-advertised homes. 

_Insurance Broker_:

Safeguard your investment by making sure you have comprehensive coverage. Going unconditional on a home is smoother when you've verified your insurance coverage with a trusted broker. Older homes, in particular, may raise concerns about past renovations to foundations, electrical, or plumbing. It's crucial to make sure you can get insurance!

You can typically secure insurance up to six weeks before settlement, so plan accordingly and factor it into your budget. By addressing insurance early in the process, your transition to homeownership will be much smoother.

_Solicitor / Conveyancer / Lawyer_:

Whether it's your first home, an investment, or a refinance, the essential service you'll need is conveyancing. You can opt for dedicated conveyancing firms or enlist the assistance of solicitors, often backed by Registered Legal Executives for extra support. Find someone you're comfortable with, as they play a crucial role as the intermediary between you, the vendor's solicitor, and the bank.

These professionals are your go-to for signing documents, transferring funds, updating titles, and managing council rates and water payments. Beyond being a service, they're a wealth of knowledge, ready to answer your questions. 

Consider discussing estate planning (will options) at the same time. Opt for firms with fixed prices, especially if you're a first home buyer with many questions.

While pre-approval doesn't require a solicitor/conveyancer, note their details when making an offer, as they'll review the agreement for you. If you're unsure where to start, we have preferred partners depending on where in the country you’re based.

_Building Inspector_:

In today's real estate landscape, a building report is often a legal or bank requirement. Just as you wouldn't buy a second-hand car without a mechanic's inspection, investing in a home – a more substantial asset – warrants similar scrutiny.

Inspectors go beyond the surface, checking foundations and roofing. Remember, these reports focus on issues, not the positives. Distinguish between minor maintenance and potential financial burdens, ensuring you grasp your home's true condition before finalising any deal.

_Accountant_:

For our self-employed individuals seeking pre-approval, it's crucial to plan ahead. If your financials are freshly completed, fantastic! If they're not, be prepared to provide them as soon as you can. Depending on the time of year or your financial cycle, forecast or management accounts may need to be prepared, adding an extra layer of time. Ensure you factor in this potential delay when working towards pre-approval. 

_Registered Valuer_:

When your deposit falls below 20% of the purchase price or you're acquiring a newly built or off-plan property without a title, a Registered Valuer becomes essential.

The good news? You don't have to search for one – your adviser or bank handles this, though it comes at your expense. With a standard turnaround time of approximately 6 business days, it's crucial to factor this into your timeline. For offers on a property, ensure a reasonable finance timeframe, considering the valuation process and subsequent bank review, which may take an additional day or three.

**Tailoring Your Team to Your Needs:**

Remember, not all these professionals may be required – it depends on your unique circumstances. Your journey to homeownership is as individual as you are.

**Start the Conversation:**

Not sure where to begin? Schedule a quick 15-minute chat [here](https://calendly.com/tella-advisors/home-loan-expert-chat?) to discuss your home ownership goals and aspirations. We're here to help you navigate the exciting journey ahead!

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Navigating Your Journey for Homeownership

_**Please Note:** This newsletter was originally published on 29th September 2023. While the information presented here may still be valuable, some aspects may be outdated._

Your deposit is sorted, but the amount the bank is telling you that you can borrow falls short of what's needed for a realistic shot at homeownership. Or perhaps you're already a homeowner looking to borrow more for renovations, but you're being told that your income isn't sufficient. It's a common dilemma, and you need a solution.

Now, before you consider asking for a raise, taking up a second job, or starting a side hustle (keep in mind that you'll generally need these additional income sources for at least a year to meet the bank's criteria), let's take a different approach. How about focusing on reducing your expenses?

Your bank statements reflect your monthly spending, and it’s no secret the banks review these. However, most banks often use the national average to estimate expenses. So, what changes can you make to improve your situation?

I'll break it down for you, but be warned, we'll dive into some numbers here.

If you have a **credit card, store card**, or any old overdraft account still open, it could be affecting the amount you can borrow. Even if you don't max out these cards or pay them off in full each month, they're still considered to be used to their maximum limit because they're available for use. 

Typically, this is seen as an cost equivalent to 4% of the limit. So, a $1,000 credit limit translates to a $40 monthly cost. You might think it's not much, but consider if you have multiple cards, like a GEM Card, Farmers Card, Mastercard, and Visa for a total limit of $10,000 or even $15,000. That's a $400 per month 'expense'. 
Still doesn't sound significant? Well, with $400 a month, you could pay off a $60,000 home loan over 30 years. Let that sink in - $400 a month can make a huge difference in the long run.

Basically, that $10,000 in credit card limits could be limiting how much you can borrow by a factor of six. The solution? Repay and close down those cards to increase your borrowing capacity, or reduce the limits if you're not actively using them.

But what if you need these cards for online bookings or travel, and the current limit won't suffice? Well, you can also load money onto them to purchase more expensive items and still earn rewards or points your credit card offers.

Now, let's talk about **Laybuys and Afterpay**. These can impact the amount you can borrow too, depending on the product. Sometimes it's the limit you have, other times it's the average of your monthly repayments. They might not seem like a big deal, but if you're paying $100 a month on these, they could be the obstacle preventing you from securing that extra $15,000 needed for home renovations. Don't let a small expense become the deciding factor for your kitchen or bathroom makeover.

**Personal loans and car loans** are quite common, often costing $400 a month or more. Even if you have just a few months left to pay, these payments will be factored into your borrowing amount. It's worth focusing on paying them off.

Now, let's talk about student loans; this one's a bit different and more personal. If 10% of your income goes towards repaying your student loan, that money could cover a significant portion of your home loan instead. While it may not always be feasible, for first-time homebuyers, if your student loan balance is low enough, it might be worth considering using your savings to pay it off and have a lower deposit for your home (making sure you still have the minimum deposit needed).

So, is it really your income, or are these perceived 'bank expenses' the main obstacle holding you back from getting that little bit more you need?

If you're looking to see how much you can increase your borrowing power by, don't hesitate to book a [free, no-obligation call](https://calendly.com/tella-advisors/home-loan-expert-chat?) with a Tella mortgage expert today.

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Reducing Perceived Expenses for Homeownership Success

_**Please Note:** This newsletter was originally published on 23rd September 2023. While the information presented here may still be valuable, some aspects may be outdated._


 
If you or your children face challenges securing a first home, you're not alone. High prices and slow savings can make owning a home seem like an elusive goal, especially for those going it alone. But having a supportive parent or family member can make this dream a reality.

This is your resource for understanding ways to achieve home ownership together. From family loans to gifts and guarantor roles, we're here to guide you. Our goal is to equip you to confidently extend a helping hand, guiding loved ones on their exciting path to owning a home.

And here's encouraging news: Over half of first-time homebuyers today receive family financial support. Yes, the Bank of Mum and Dad often steps in to make this happen. This support takes various forms, like loans, gifts, or being a guarantor.

Remember, it's not just parents – close family members can help too. Let's explore these possibilities and what you need to know.

**Family Loans: Defining the Terms**

Imagine a scenario where parents or family members lend money to a loved one to go towards their first home. It's a loan, and like any loan, there's an understanding it'll be repaid at some point. But before you dive in, it's important to have an open conversation and set clear terms. Questions to ponder include:
- Is there any interest on the loan, or is it interest-free?
- When is the loan due for repayment? Is it when the property is sold?
- Will the family members lending the money have a say in the type of property bought, or is it a hands-off arrangement?

Once you're on the same page, it's recommended for those providing the loan to consult their lawyer and draft a Deed of Acknowledgment. This document outlines the loan's terms, including repayment specifics.

**Gifts: Support with No Strings Attached**

Similar to a family loan, a gift involves a sum of money provided by family members, with no catches: it doesn't need to be paid back, and no interest is applied or payments made. 

When applying for a home loan, a gifting certificate is required. This certificate states the gift amount, the giver, and importantly, that it's non-interest bearing and there won't be an encumbrance on the title. An encumbrance is a note on the property title showing who is owed money - the most common of which is a bank's mortgage.

However, be aware that under certain circumstances, the courts might consider the gifted money as "relationship property," especially in case of a relationship separation. To navigate this, we recommend you seek legal advice. 

**Guarantor Support: Sharing the Risk**

Another approach is having parents or family members act as guarantors.

In this setup, they use their own assets – often their house – as security for the first home buyers home loan. This enables them to enter the property market without needing significant cash upfront in the form of a loan or gift. Typically, the guarantee covers the amount needed to get to the crucial 20% deposit, so it's only a portion of their property's overall value that is used. This specific portion is set up as a separate loan to be repaid faster.

Remember that if the home owner struggles with repayments, the guarantor will likely become responsible for the loan. Because of this risk, the bank will also assess the guarantor to ensure they have sufficient income to meet the repayments if needed.
 
As always, it's important for both parties to seek separate independent legal advice before proceeding with a guarantor arrangement to fully understand the potential risks and long term implications, such as what happens if the parents/guarantors want to sell their home and there is still a loan in place. 

Whether it's a family loan, a gift, or a guarantor arrangement, clear communication, transparency, and legal guidance are key.

Should you be considering the Bank of Mum and Dad as a means of homeownership support, [book a free, no obligation, chat](https://calendly.com/tella-advisors/home-loan-expert-chat?). Our Tella mortgage experts are here to help you navigate this exciting journey.

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Bank of Mum and Dad: Another Path to Homeownership

_**Please Note:** This newsletter was originally published on 15th September 2023. While the information presented here may still be valuable, some aspects may be outdated._

 

Spring has arrived, and with it comes the perfect opportunity to take the first steps towards your home ownership dreams. In this post, we'll teach you all about deposits, how to build them, how much you'll need for your home loan and what happens if you don't have enough?

Before you can step into the world of home ownership, it's essential to build a strong deposit. Here are some ways to piece together your deposit:

- **Cash Savings:** Saving a portion of your income over time.
- **KiwiSaver:**Utilising your KiwiSaver contributions for your first home purchase.
- **Kāinga Ora:** Explore government grants and loans through Kāinga Ora to boost your deposit.
- **Family Assistance:** Consider the support of family members, whether it's a loan or a gift.

For more information on building your deposit, or any other home loan related topics, explore our informative guides in Tella's Learn section [here](https://tella.co.nz/home-loans-mortgages/learn?). 

**Understanding Your Deposit Requirements**

The deposit requirements may seem complex, but we're here to simplify it for you. While some lenders may accept a 5% deposit for first home buyers, it’s common practice today to aim for at least a 10% deposit. A larger deposit not only opens doors to better loan options but also paints a responsible financial picture for lenders. Also, understanding your Loan to Value Ratio (LVR) is important, as it affects your interest rate. If your LVR exceeds 80%, you are likely to have a Low Equity Margin added on top of the standard interest rate.

**Starting Early: The Key to Your Success**

Kickstart your deposit journey as soon as possible. Banks consider your spending habits when assessing your loan application, so responsible financial behaviour is essential. Prepare a budget, closely monitor your expenses, and devise a savings plan that aligns with your goals. Going hard and being aggressive with repayments up front could save you thousands of dollars over the term of the loan.

**Why Prepare a Budget?**

A well-thought-out budget helps you:
- Keep track of your monthly income and expenses.
- Calculate how much you can save from each pay.
- Identify areas where you can reduce spending and increase your savings.
- Automate Your Savings

Make saving effortless by automating transfers from your income account to a dedicated savings account. This streamlined approach allows you to grow your deposit without the hassle of manual transfers.

At Tella, we're dedicated to helping you make informed decisions on your home ownership journey. Feel free to reach out for a free, no obligation chat with our mortgage experts.

[Book your call](https://calendly.com/tella-advisors/home-loan-expert-chat?) today, and let's make your home ownership dream a reality!

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Navigating the Deposit Journey

_**Please Note:** This newsletter was originally published on 4th August 2023. While the information presented here may still be valuable, some aspects may be outdated._
 

The belief that bank lending for self-employed individuals is tough and hard to obtain might have you wondering how to secure your own home. Well, don't worry, because we're going to break it down for you here.

Let's start with the most common question: 

**How do lenders and banks calculate income for self-employed individuals?**

It all comes down to proving consistent taxable income to the bank. Forget about gross sales; what truly matters is your sales minus cost of goods, minus expenses. But here's the good part – we have some flexibility when it comes to considering expenses. We often request to 'add back' certain non-cash expenses, like depreciation, as they don't involve actual money spent. Similarly, in some cases home office expenses can be added back as well.

It’s not a black and white process, and you'll need to have a good mortgage broker that understands these intricacies to be able to break it all down effectively.

Banks usually prefer an average of the last two financial years, but some may accept just the last one year. Given the rollercoaster ride businesses have experienced over the past three years, it's crucial to explain how things are expected to go moving forward.

**Don't have two years of good financials?**

Now, let's talk about low-documentation loans for self-employed individuals. While these aren't as common with main banks, some second-tier lenders still offer them. A low-documentation loan requires minimal proof-of-income documents, often just a one-page letter from your accountant estimating your income for the year. This type of loan can be beneficial if you have a solid deposit but have only recently started trading or took some time off, resulting in a less impressive previous year but promising future prospects.

**Don't have an accountant? No problem!**

If you're contracting with only one or two businesses and have minimal expenses to claim, we'll typically request your Inland Revenue submissions from the last two years. The income after expenses will be averaged out, and we'll also check recent business bank statements to ensure income consistency. 

**Do you have a side hustle?**

For those juggling a side hustle while working full-time, here's some good news. Side business income, whether it's from online ventures, weekend markets, or even Uber driving, can boost your chances of getting a home loan approval. For this to be effective, this income needs to be consistent and ongoing (with taxes paid). Banks usually look for at least a year of operation to ensure long-term viability and profitability.

**Business Loans**

Now, let's touch on business loans. Traditionally, these are heavily backed by residential property, although it may not be the most ideal approach. While getting an unsecured business loan isn't easy, there are now options available for businesses that have been trading for over 12 months.


If you have any questions or need assistance with your home ownership or business goals, don't hesitate to [book a free, no-obligation call](https://calendly.com/tella-advisors/home-loan-expert-chat?) with a Tella mortgage expert today.

In the meantime, feel free to share this post with any of the other 364,599 self-employed individuals in NZ (According to MBIE stats for March 2023).

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Self employed and looking for a home or business loan?

_**Please Note:** This newsletter was originally published on 21st July 2023. While the information presented here may still be valuable, some aspects may be outdated._
 

There still seem to be a lot of rumours about how hard it is for first home buyers to get into homes and how tough it is to get bank approval. But house prices are down, the banks really want new business and they're doing what they can to help with approvals. So just to bust a few myths, this is what we have seen approved in the last month or so:

**Back in NZ - unsure about short time on the job:**

We recently helped a young couple in their early twenties settle into their very first home after returning from working in Australia. They were aiming for Kainga Ora's 5% deposit First Home Loan so thought they needed a years worth of job history to make it happen. 

Once we tallied up their savings, KiwiSaver contributions, and First Home Grant, we realised they had enough deposit to buy the property without Kainga Ora's help. 

And guess what? If you're buying a property without Kainga Ora's assistance, there is no 'time at employment' criteria you need to meet. You just need to have an employment contract and not be in a probation period. 

We got them approved with a main bank.

From our very first conversation to applying and finally settling, it took us just 6 weeks to see them stepping into their brand new home. 

**No credit history? No problem!**

One of our youngest clients recently purchased their first property in Auckland at the age of 21. They were in their first job and had never had debt ever before, so they also didn't have any credit history, which was no problem at all!

With 10% deposit they had saved, it showed the bank that they were a diligent saver and good with managing their money. We got an approval within 4 days of our first conversation, with the property settling just a month later.

**Can't refinance because house value dropped?**

Did you know that Loan to Value Ratios, or LVR, are only applicable to new lending? Property values have dropped. But it doesn't affect your ability to refinance as much as you might think, as long as your loan amount doesn't increase. Even for investment properties with over 65% lending, you're in luck – we've had success with major banks allowing up to 85% lending.

We recently helped a client refinance their owner occupied home and investment property from a second tier lender where they had an interest rate of 11%. Because they moved to a main bank, they saw savings on interest rates immediately! 

Whatever your situation, we're here to help with your home ownership goals. [Book a free, no-obligation call](https://calendly.com/tella-advisors/home-loan-expert-chat?) with a Tella mortgage expert now.

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Busting home loan myths

_**Please Note:** This newsletter was originally published on 10th March 2023. While the information presented here may still be valuable, some aspects may be outdated._

If you’re looking to buy your first home this year, conditions are more favourable than they have been for some time. And now there’s another helping hand available in the form of the Kāinga Ora First Home Partner scheme. In this newsletter we run you through what’s involved in this new co-ownership offering.

We also assess the landscape for those already on the property ladder, because 2023 will see many of you re-fixing your home loans as current fixed terms expire.

This will likely be a shock to the system (and wallet) with rates, and therefore repayment amounts, significantly higher than they were at the start of your term. It’s crucial to make the right choice when you re-fix as you’ll be locked into higher rates for a while.

What’s the best strategy now, and for how long should you re-fix? We look at some of the options you have to manage this new interest rates environment.

**Kāinga Ora First Home Partner**

As property prices fall across the country, lenders and real estate agents are reporting more first home buyers entering the market. CoreLogic data shows that a quarter of properties sold now are to first home buyers, which is a new record.

With investors still hamstrung by a 40% deposit requirement, it’s a great time to get on the property ladder if you can.

But what if you still have a shortfall between your deposit, the amount a bank will lend you, and the price of the home you want to buy? In a situation like this, Kāinga Ora’s new First Home Partner scheme could be an option.

Designed specifically for first home buyers, the scheme operates as a shared (or co) ownership model, with you as the majority homeowner and Kāinga Ora as a third-party shared owner of a property.

**So how does it work?**

Kāinga Ora will contribute a certain amount towards the price of your property (up to a maximum of 25% or $200,000 – whichever is lower), giving them an equivalent ownership share.

So, if you have a 5% deposit for the house you want to buy, and a bank is willing to lend you 75%, Kāinga Ora would fund the remaining 20% of the property price (giving them a 20% ownership stake).

You then agree to pay that 20% back to them until you’re the sole homeowner.

You’ll be responsible for any costs associated with the purchase, such as legal and conveyancing fees, and you’re also in charge of all the ongoing property ownership costs including rates, insurances and maintenance.

Kāinga Ora won’t occupy your home, or tell you what to hang on the walls, but they will have some say as a shared owner. Keep in mind that you’ll need their approval for any major renovation projects as a guard against over-capitalising on the property.

See our new [guide](https://tella.co.nz/home-loans-mortgages/first-home-buyer/kiwisaver-first-home-grant) for more details on the eligibility criteria and finer details of the First Home Partner scheme.

**Need to re-fix this year?**

If you need to re-fix your home loan this year, you’re not alone.

The Reserve Bank says that between October last year and September 2023, nearly half of Kiwis’ home loan debt is due to be re-fixed.

With uncertainty around rising interest rates, inflation, and cost of living increases, here at Tella we’re seeing lots of questions from homeowners who want to know what’s the correct strategy when it comes to re-fixing their home loans.

Is it better to go for certainty by locking in for a longer term such as 5 years? Or fix for 1 year and take the risk that interest rates will be in a better place 12 months from now when you need to fix again?

The answer is that the correct strategy is always the one tailored to your individual circumstances. And takes your plans for the next few years into account.

Typically, a 1-year fixed rate is the cheapest rate option, but NZ’s big 4 banks are currently pricing their 2-year fixed rates lower than their 1-year offering.

This is partially to do with competition amongst lenders. They all want your home loan business and are trying to make it attractive for you to switch (and then stay). Longer term rates (3-5 years) are also being priced lower than the 12-month options.

However, with most economists predicting rates to ease again from the end of 2023, there may be higher risk to you in fixing for a longer term, than a shorter one.

An important question to consider, along with individual rates and terms is: how ready are you to ride out your future interest rate jump?

Although higher rates are going to hurt, the comforting news is that lenders already factored in any potential rate rises when they assessed your home loan application. Their modelling stress-tested your ability to service their loan at higher rates, and concluded it was achievable.

But on the flip-side of this, any money you had earmarked for other purchases or activities will now go toward servicing your home loan for the period of your new term.

Get ahead of the rise now. Crunch your household budget. Reduce as much discretionary spend as you can. Also try to clear any outstanding debt (particularly high-interest credit card debt) to ease the pressure on your pay packet.

Those homeowners who are currently paying off more than the required fortnightly or monthly amount to pay down their principal more quickly, could look at temporarily dropping it back to only the amount required. This would shrink the gap between their current and higher re-fixed loan repayments.

Compare the latest interest rates for over 20 lenders [here](https://tella.co.nz/home-loans-mortgages/rates), or to us now to get the best deal when re-fixing this year. Our experienced Home Loan Specialists are available on 0800 4 TELLA (0800 4 83552). They’re here to guide you through these interest rate rises and will structure the best home loan option for you.

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 Refix your interest rate with confidence