With Philippa Farmer (Canopy Group)

philippa-canopy-1aThe country’s housing shortage coupled with rising property prices in recent years have not only made it difficult for many people to purchase their own home but deterred some from even trying. However, Philippa Farmer knows the Kiwi dream of home ownership is entirely possible. A mortgage and insurance adviser with Canopy Group, she is adept at sourcing the best finance options and insurance packages as well as showing clients how to maximise Kiwisaver benefits.

What does a mortgage adviser do and why should I use one?

A mortgage adviser is a home loan specialist. The average home buyer might go through the process of applying for a home loan just a few times during their entire life. A mortgage adviser does it on a weekly basis. The difference between a mortgage adviser and a mortgage manager at the bank is that the former is independent – we work for you, the customer, rather than the lender.

How much do your services cost?

My standard services are at no charge to the customer. If a loan application is successful then I am paid by the lender upon settlement. Some clients worry that this means the bank won’t give them as good a deal than if they had gone direct; this is not true. The adviser channel is just one way banks get business; other ways are via their own mobile mortgage managers, and within their branches. All these channels actually have a similar cost to the bank and, in reality, the offers obtained by advisers are often superior to what the bank will offer directly as they know advisers have access to many options.

I want to use my Kiwisaver as my first home deposit. How much can I take out?

If you qualify for a first home withdrawal, then generally you can withdraw the full amount in your fund less $1,000. This means you can access funds you yourself have paid into Kiwisaver, your employer’s contributions, any returns your fund has made and the Member Tax Credits paid in by the government. An exception is if you have transferred your Australian super into your Kiwisaver fund – this is not available to be withdrawn for a first home purchase.

What about the Homestart Grant, is this different to the First Home Withdrawal?

Yes, it is. The Homestart is additional money paid by the government to help you with your first home deposit. There are a few more eligibility criteria to meet including a maximum purchase price and income caps. If you are buying a new build then you can spend a little more, and your grant will be twice as much, up to $10,000.

Can I use my Kiwisaver withdrawal to purchase bare land?

Yes you can, but there are some important conditions to be aware of. Firstly, you must intend to build on the land within a certain time frame. If you are also applying for the Homestart grant, then you will need to show that the total cost of your project (land plus build costs) are within the price caps before you will be approved. You must also use your Kiwisaver withdrawal to complete the purchase of the bare land. You can’t buy the land first and then apply for a withdrawal to fund the build.

I’m struggling to save a 20% deposit, what are my options?

Although standard bank lending criteria states you need a 20% deposit, there are several options for those who don’t quite have enough. Banks are allowed to lend 15% of their residential lending portfolio to borrowers with small deposits. Generally this lending is reserved for existing customers, and your application must be very clean – no bad credit, poor account conduct or marginal servicing ability. There are also a number of non-bank lenders who are not subject to the same restrictions, and who will consider applications for both home buyers and investors who do not have the required deposit for mainstream bank borrowing. Another option is assistance from a friend or family member, commonly known as the bank of Mum and Dad!

Mum and Dad are happy to help us with a deposit, how do we do this?

There are several ways parents (or other family members) can help out – gifting, loaning, acting as a guarantor or offering up equity in another property. It’s all about finding the most suitable way for your specific circumstances, ensuring everyone is on the same page and that whatever is agreed on is recorded in writing. It is also very important for all parties to seek independent legal advice so they understand exactly what they are signing up for.

I have bad credit, does this mean I can’t buy a home?

Not necessarily, although your options may be a bit more limited. There are lenders who will consider applications from those with bad credit, even discharged bankrupts.

I’ve already been declined by my own bank, so what other options do I have?

Each lender has very different criteria, and often, while you may not qualify with one bank, you may easily fit the criteria of another. There are also non-bank lenders who are not restricted by the Reserve Bank, and so are a bit more flexible. The beauty of working with a mortgage adviser is that you only have to complete a single application to gain access to numerous lenders – no running all over town filling in multiple forms at different banks. What’s more, mortgage advisers are aware of the differing lending criteria and are able to assist in choosing the most appropriate lender for your individual circumstances.