In certain markets where properties are moving quickly, your ideal scenario would be to aim at being in a position to purchase and move at the same pace
as the market, that is being ready should a good deal presents itself. It is always better to be prepared for an opportunity and not have one, than
to have an opportunity and be unprepared for it.
Our recommendation would be to have your deposit funds ready – if they are in the form of cash this is simple. But if you are tapping into existing equity
or your Kiwisaver, it makes sense to do the following:
- For utilising equity in an existing property I would recommend getting your loan applications underway early for a top-up so you can be certain you
meet the equity and servicing requirements – but also so that you can get something on paper and that you’re ready to go and act quickly. In an
ideal scenario this would be then set-up as a revolving credit so you can move fast – but if not, a conditional approval subject to signed sale
& purchase agreement, and (if applicable) a rental appraisal for the proposed new property is the next best alternative.
- For Kiwisaver I would suggest that you contact your Kiwisaver provider early to find out if you are eligible – and in addition because they can usually
take 10-15 working days to get this finalised – depending on provider. In addition to this it might be worthwhile checking if you’re eligible for
a First Home Grant.
If you’re in a position where the above is sorted – the next best step is to get pre-approved. Have a home loan offer on paper which will be subject to
a few conditions – if there are any that relate to you as a borrower, then get those ticked off (bank statements, payslips, etc.) and so the only ones
that should remain, relate to the property itself (Sale & Purchase Agreement, Rental Appraisal, etc). In the absence of bank approvals or where
you may be looking at short-term property transactions (flipping, trading, etc.) then non-banks are able to approve loans very quickly and usually
only take a few working days for this. They are more focussed on the security property itself and your exit strategy, than meeting servicing requirements.
They also usually require more deposit funds due to the increased risk – and of course have interest rates higher than banks – and fees. The key thing
to be aware on the pricing side is that the lending is short-term, so the real cost is actually a lot lower than if it were held long-term like other
In the current environment, all lenders are slower than usual due to increased volumes and also increased compliance requirements, so your best bet to
be in a position to act quickly would be to get pre-approved and get your ducks in a row early.
My team and I are actively working with investors to get deals across the line even throughout COVID-19. Feel free to send me an email if you would like to have a chat about how we can help you meet your investment goals in 2020.
ABOUT THE AUTHOR
Ryan is a Key Accounts Manager at Kris Pedersen Mortgages and Insurance as well as a property