Things tend to move quickly once you have found your dream home. When applying for a mortgage, it is crucial to realise that the lender generally finances 80% of the house value, as well as several other aspects such as equity, income, and so on. In this instance, lenders play a critical role in getting your ideal property, particularly when our budgets are limited.

Before we get into the benefits of pre-approved loans over traditional loans, it is important to understand what a pre-approved loan is and how the process works.

What is a pre-approved home loan?

A pre-approved home loan, as the name suggests, is a loan that is granted before the property transaction is completed. This is the same process as applying for a conventional loan, but the difference is that you do not need to supply any property-related papers.

Lenders require a few necessary documents for validation, such as an income tax return, driver’s licence, proof of address, bank account statements, and proof of income such as payslips, etc. This approach also includes a processing fee, which is adjusted when the loan is disbursed.

Lenders will also request your credit score to determine your creditworthiness. If the applicant already has a loan, the previous loan amount will be deducted from the approval limit. It gives you conditional permission for a mortgage or an investment loan. It normally lasts for a set period of time – usually three to six months, but this can be extended with a review and request – and acts as a guideline for how much you can afford to spend.

Moreover, once the validation procedure has been completed, the lender will issue the applicant a letter of pre-approval for a home loan. This pre-approved home loan provides a set time frame for the borrower to finalize the property purchase. If the applicant does not get a property within the given time frame, they must reapply for the pre-approved loan because the processing fee is not reimbursed or altered later in the loan application.

Now that you understand the basics of a pre-approved loan and the process, let us look at its benefits.

Benefits of having a pre-approved home loan

Final loan disbursal becomes fast and easy– With the majority of loan verification done early on, the loan disbursement process becomes relatively fast and simple. The only documents awaiting validation are the property documents. The sanctioned loan amount is disbursed as soon as the documents are confirmed. This also benefits buyers when the property has a shorter transaction window and a term for the process.

House hunt becomes easy and more focused– Real estate holds a variety of various houses, such as apartments, units, and independent houses, among others. If the applicant already has a budget in mind, the search for a home becomes much easier. Loan pre-approval tells you how much you can afford, allowing you to shop for properties that are within your price range rather than wasting time looking at properties that are out of your price range. For example, a person with a pre-approved loan of $800,000 will hunt for a home in the $800,000 to $900,000 price range. There is no worse feeling than being unable to close on the home you want to buy. The borrower is in a better position to hunt for a suitable house with a pre-approved loan as being aware of the budget.

Negotiation process becomes easy– There is a better chance for you to bargain with builders or sellers once you have a pre-approved loan, and they will take you seriously in comparison to any other prospective buyer as they have proof that you are 100% invested in purchasing. Estate agents can see that you are a serious buyer who is ready to act swiftly if your loan is pre-approved. This provides you with more bargaining power when negotiating prices with sellers. This is because the bank is confident in your finances and ability to repay, and they are more likely to convert into genuine purchasers rather than broad inquiries. With pre-approved loans, along with the low-interest rates, you can also choose the loan’s repayment term, which allows for more affordable installments.

Finances are more planned– pre-approved loans enable a person to understand his or her financial situation and value. Furthermore, this allows a person to manage their savings and make a down payment effectively. With a loan pre-approval in hand, you are less likely to make an offer or pay a deposit on a home only to discover that you are unable to acquire financing to finalise the acquisition.

Bid with confidence at auctions- Pre-approval is necessary if you are purchasing a property at auction. It shows that the highest bidder is committed to the purchase when the hammer falls at auction – there is no cooling-off period. With loan pre-approval in place, you can confidently bid up to your approved loan amount.

To sum up, getting pre-approval for a home loan does not necessarily ensure that your loan will be accepted. Property and related paperwork, as well as the bank’s due diligence criteria, play an important role. Furthermore, the loan application must be submitted within the sanction period. Aside from these considerations, a pre-approved loan always provides an advantage that normal loans do not.

If you are ready to take on the journey of homeownership, reach to our expert mortgage broker and we will provide you access to a wide choice of lenders, including many major banks.

We understand these lenders’ loan pre-approval standards, making it faster and easier for you to apply for pre-approval. And, once you have discovered your dream home, we can speed up your official loan application by preparing the paperwork, filing the application, and following up on your behalf.

A home loan is an excellent source of financial aid that helps you in purchasing your dream home. A home loan is a long and major commitment and repaying consistently over a long period of time may be far more difficult than applying or receiving approval from the bank.

When applying for a home loan, you must go through a stringent documentation and approval process. Since the loan amount is large, lenders follow a strict procedure, as even the smallest inaccuracy might result in the application being rejected.

As a homeowner, the loan repayment procedure can be financially draining because you must repay on time without failure, or it can affect your credit score and future. Furthermore, the loan’s interest component adds to your troubles. Repayment, on the other hand, does not have to be a chore if you plan ahead of time.

Let us learn about Home Loan Repayment Tips:

1. Loan Prepayment: You can reduce your interest payments by prepaying the loan amount. However, you should confirm this with the lender because some charge a penalty or require you to pay a fee if the interest rate is fixed. Although with floating rates loans it may be easier to prepay.
2. Be on the lookout for cheaper interest rates: Find out if lenders are offering lower interest rates so you may quickly refinance or transfer your home loan balance. Refinancing can be a wise move because it decreases the interest burden by transferring the outstanding principal amount from the previous lender to a new lender at a reduced rate. This is a simple and practical technique to save money on interest and use it to meet other financial responsibilities. Many people become complacent when it comes to paying their mortgage. They simply continue to pay what the lender demands of them, with little regard of the industry. Lenders provide different deals at different periods of the year. With the right timing, you could switch your mortgage and take advantage of an array of discounts that allow you to repay your home loan faster.
3. Get a shorter-term loan: The longer the loan term, the greater the interest rate charged by the lender. If you are financially secure, opt for a shorter term. This ensures that the Home Loan repayment procedure is expedited and that the interest rate is low.
4. Larger down payment: Typically, a house buyer is expected to make a 20% down payment at the time of purchase. Although, if financially possible, it is better to give in a larger down payment so the loan amount can be decreased. This may help to cut the interest rate even further, and the home loan payback will be faster.
5. Reduce excessive spending: This is self-explanatory, but it bears mentioning. Committing to paying further than the set payments into your loan and working towards debt-freedom goes hand in hand with reducing wasteful spending. Sure, giving up those extra little luxuries will not be easy, but even the modest amount paid into your repayment instead can make a great difference.  Every additional payment accelerates the repayment of your principle debt, saving you hundreds of dollars in interest.
6. Create an offset account: Consider opening an offset loan account if you do not already have one. Offset accounts function by linking your savings account where your paycheck is deposited, to your home loan account; the value in this account is offset against the balance in your home mortgage account, and you are only charged interest on the difference. With your repayments remaining constant while you pay less interest, more of your repayment goes towards paying down your principal loan, making your money do the hard work for you.
7. Assume your mortgage has a higher interest rate: For example, your loan is on a 4% interest rate and if you make the set required payments, the loan will most likely last between 20 and 30 years. So, why not use your own interest rate on the mortgage? If you are at 4%, repay as if the loan had a 5% or 6% interest rate. These additional “interest payments” are not applied to the interest at all but will instead cut the loan principle. With this method, you can pay back the loan faster, and you will not be caught off guard if the variable rate rises. With this, do check with your lender if there are any penalties if you make extra payments to avoid overpaying and wasting money.

In conclusion, whatever path you choose, the first step is always to work out your finances beforehand. A good starting point is to discuss with a mortgage broker and find out the ways best suitable to your financial and mortgage conditions. Reach to us and we help you plan your repayments to make sure your loan is settled as quickly as possible

Buying a new real estate is hard work in itself and requires financial preparation. There are many steps involved in obtaining a home loan from collecting all the right documents, talking to the mortgage broker, and filling out the application form, all while hunting for the perfect home.

Before you move ahead with all those tasks, one aspect to consider in the process is how your credit score plays a vital role on your chances of successfully applying for a mortgage. Studies have revealed that a vast amount of Kiwis have less than enough knowledge of how their credit score is one crucial factor that impacts their chances of securing a home loan.

For most people, a home loan is the biggest form of a mortgage they will ever get. With it being of such importance, the mortgage lender’s main concern is to find out whether you are capable of paying the debt back. Most lenders will take credit score into consideration in addition to other factors like income, occupation, and age when evaluating your home loan application.

It is important to understand the effect of credit score for borrowers, as the chances of missing out on a better deal can potentially lead to losing thousands of dollars on higher interest rates, or worse getting an outright denial for a mortgage application.

Understanding credit score:

A credit score is a tool that helps lenders find out whether you qualify for a particular mortgage, service, or credit card. It is a numerical representation of a borrower’s creditworthiness or reliability. It shows the lender how well the potential borrower has been managing their finances, including their ability to make mortgage repayments. The score generally ranges from 0 to 1000, from 1000 being the highest score to 0 being the lowest. According to Centrix, one of the main credit reporting agencies in New Zealand, a low credit score ranges from 0 to 494, a fair score ranges from 495 to 695, a good score from 650 to 768, a very good score from 769 to 845, and lastly the highest and excellent score falls between 846 to 1000.

If an applicant falls in between the low and fair range, the lender will proceed with the application with some caution. Some lenders may be willing to grant a loan but may do so at a higher interest than others as the risks involved for them is more.

With the applicants that are anywhere between the good to very good range, the chances of approval on the application are positive. This is also the average credit score of residents in New Zealand.

For the scores that fall within the excellent range, the risk involved for lenders is considered very low with the highest chance of easy loan approval. Lenders are content with applicants of this score and may even offer them better loan options.

The credit score contributes as a vital part of the financial products you take out throughout your life. To ensure that your score stays over the acceptable limit, it is important to understand various factors that can affect and change it.

• Monthly repayment history: These repayments include everything from finance, credit card, car loans, hire purchases, insurance, student loans to any other form of credit or loan. They also include payment history of daily expenses such as phone, gas, energy, and electricity bills. Any late or overdue payments will most likely have a negative effect on the score, if there are more than one it can have a substantial impact on the score.
• The duration of one’s line of credit, as well as their newest and oldest accounts and the history of how active these accounts have been.
• Any new account that has been opened recently.
• Court notices and judgments under the applicants, in regard to Non-Asset Procedures (NAP), outstanding debts, bankruptcies, and Summary Instalment orders (SIO).
• The amount of available credit being used and total debts.
• Your employment history.
• The number of hard credit searches on the credit report, which appear when one actively makes an application for a new credit or loan. Every time an application is submitted, it leaves a footprint on the credit file which lenders use to make the decision on whether to grant your mortgage.

There are many ways one can improve their credit score. One of the easiest ways to ensure a good score is by making all repayments on time and closing any overdraft credit accounts.

Although having a good credit score is important, a bad credit does not necessarily mean that your goal of owning a property is over. We have worked with clients from all walks of life, reach out to us today if you dream of owning a house, and we can advise and help you find the right mortgage solution for your unique requirements.

Buying your first home or investment property is exciting. It is probably one of the biggest purchases most people will ever make, which is why getting it done right is crucial. As thrilling it is to buy a new home or investment, it can be the most nerve-wracking, too, because getting a mortgage and closing the loan can be a long, complicated process.

Shopping for a mortgage and getting it approved is one of the most important parts of buying a home. Soon as you are ready to kick start your buying process, you will need to figure out where and how to shop for a mortgage loan that suits you. There are a number of lenders out there to pick from but the question that arises is whether to go directly to the bank/lender or get a mortgage broker. It is a reasonable question, given how lengthy and complex the process can be. It does not matter if you are refinancing or buying a new real estate, you will need to work out the loan application and navigate through all the offers to secure your funds. Banks and brokers are both good choices but understanding how both functions will help you determine the best option.

Here’s how Mortgage Brokers work and their advantages?

A mortgage broker acts as a middleman between the mortgage lenders and borrowers when shopping for a mortgage product. When buying a real estate or refixing, a mortgage broker can help you identify the best suited mortgage offer to your specific needs and situation. Brokers not only help you get the most competitive rates and prices, but they also check and verify whether the offered loan is a good match with the lender. An experienced broker will be quick to determine the best lender for each individual borrower. They simplify the loan process for you as they work with everyone involved in the lending process – from the real estate agent to the underwriter, closing agent and mortgage lenders– to make sure a borrower gets the best loan and the loan processes quickly and closes on time.

It is our job to “do the math” and provide you the information on what size mortgage you qualify for. We help you get the best deal for your loan and save money by researching various loan offers. We even negotiate with lenders on your behalf so do not overspend.

Finding the right loan is just a part of the process. A broker can also pull the buyer’s credit reports, verify their income and expenses, and coordinate all the loan paperwork. Many brokers have access to a powerful loan-pricing system, as well, which prices a mortgage loan across many lenders at one time, thereby speeding up and streamlining the process.

If you are looking to get your first home loan approved, for example, finding a mortgage broker with extensive experience working with first home loans can make the process more swift and quicker. We represent multiple lenders which gives us access to a wide array of products for you to choose from. We work with a variety of lenders, including banks, credit unions and private mortgage companies. So, if you have a less than perfect credit, are self-employed or have any other special circumstances, this extra flexibility can help you find the best fit.

Mortgages have a lot of working parts: interest rates, down payments, origination fees, points and more. And a good broker can help you understand how each of these variables work together and what makes one loan a good value compared with another.

So, what happens when you approach a lender directly?

The downside of working with a bank directly is that it can cancel out many good options available in the market. If you wanted to compare the loan rates and programs from different direct lenders, you would have to apply to each to one separately and do the evaluation yourself.

A mortgage broker also has access to more lenders and mortgage products than a bank loan officer, who is limited to the mortgages provided by the bank. A direct lender only provides you with limited options and the potential of the bank next door providing a better deal will be left unexplored.

Banks are bigger companies who do daily loan applications and there is a chance your loan will not be personalised to your needs. And if you work with a broker, it is likely you will have more human-to-human contact as the two of you work through your loan application. Why go through the difficulty of doing everything yourself while missing out on a better deal, reach out to us today and we will get your application going in no time.

Investing in real estate for beginners can really be as conceptually simple as playing Monopoly. You need to understand the fundamental factors of investing and owning real estate, and the risks related to it. Simply, to win, you buy real estate while avoiding bankruptcy and generate rental income through it so you can invest in more properties. This cycle keeps moving and you make money through it. This may seem simple, but bear in mind that “simple” does not mean “easy.” If you make a mistake, the consequences can range from minor inconveniences to major disasters.

Nowadays, a lot of modern investing is relatively hands-off. You buy a stock or a share or an index fund, hold it and let it grow for years or even decades. And while this is certainly a smart and simple way to invest, it is not the only way. For would-be investors who are attracted to a more tangible and hands-on method of investing, real estate is a popular option. Granted, it is not the easiest method and there can be a steep learning curve as you begin. But the payoffs are potentially quite lucrative, and if “becoming a real estate mogul” is on your bucket list, you must start somewhere.

We kiwis know that the way to build wealth is through investing in property and building an investor portfolio. It can also be seen as one of the most dependable ways to generate profit.

However, investing is tricky to navigate through, and requires research on the current market position on investor loans. It also requires you to have a detailed understanding of your current financial situation. If you are a beginner and want to get started with investing in real estate, to assure yourself the best chance of success it is essential to make a draft of your goals and create a plan. Investing in a rental property is a substantial financial commitment and the best results will usually come to landlords who take the time to get good advice and carefully plan before investing.

There are some important steps when buying an investment property and making money through it. The first step is to figure out what you can afford, which will give you an idea of how much deposit you need to make. Then we move on to how much you can borrow. It gives you a general idea of your target price range, so you can narrow your property search within your purchase budget. The good part about investing in a property is that lenders will also consider the probable rental income you will be getting from the investment property when calculating how much you can borrow.

The next step will be to calculate the loan and the properties purchase costs like application and valuation fees. Once you have an idea of how much the costs are going to be when investing you can move onto going through the loan options available that suit your needs. This is where speaking to a mortgage broker will really make things easier. Speaking to a mortgage broker will help work out, “How much are the banks actually willing to lend me?”. The first few steps of figuring out your deposits and costs is easy as you are aware of your financial situations. But knowing the amount you can afford does not necessarily mean the banks are going to give you the money. A mortgage broker has access to various lenders rather than just you going to your own bank, which is just 1 lender. We will help you find out, given your situation, how much can you afford to borrow. And that way, you can go into the market knowing that “Okay, I can afford to buy this much” and work towards that to find a property that fits within those areas.

Once all of this is established, finding a property, and moving ahead with the final loan approval will not take long with the help of a mortgage broker. A mortgage broker benefits you throughout the entire investing journey, you will simply need to discuss what is needed and they will deliver it. We will work things out for you from the beginning to assure that everything settles smoothly with you getting your hands on your investment property hassle free.

The first thing that comes up when you start planning to buy a house is to determine your budget. Once you have a budget in mind, the next step would be to work out the amount you would like to borrow for your first home. The amount you are able to borrow depends on several factors related to your borrowing capacity. When buying a home or a property, your borrowing capacity will affect the amount you could spend to purchase the property. These factors will improve your home loan eligibility significantly. Some of the factors which can help you maximise borrowing on your first loan are listed below.

Improve your credit score 

The simplest method to improve your credit score is to be regular with your credit card and loan payments. The interest rate offer you get on a loan depends on your credit score. Raising your credit rating insures a better interest rate, which means you will be able to borrow a higher loan amount. Good credit scores assure the lender that you will make the payments on time and can be trusted with a higher loan amount.

The easiest way to improve your credit score before applying for a home loan is by paying your bills and credit card payments on time and limiting excessive or new lines of credit. Holding too many credit enquiries on your report could lower your credit score.

Arrange a bigger deposit

The amount borrowed by a lender may depend on the deposit you make in relation to the value of the property, this is known as the loan-to-value ratio (LVR). Putting down a larger deposit amount (say around 20%) will save you from paying PMI (private mortgage insurance) and saves you a lot of money over a period of time. Bigger deposits could also reflect that the borrower can save money and make the repayments on time.

Lower your debts

It is a good idea to lower your outstanding debts or pay them off completely before applying for a home loan. If your debts are cleared or at least lowered, you could have a better chance of getting a higher loan amount from the lender.

Opt for a longer tenure loan

The normal period of a home loan extends for 25-30 years. If you opt for a longer tenure for your loan, say around 40 years, it will lower your repayment amount. Although increasing loan-term makes your repayments low, the total interest to be paid towards the loan will get higher.

Reduce unnecessary living expenses

Another method of saving money is to cut unnecessary everyday expenses. The more you spend, the lower the loan amount you would get. It is advisable to reduce spending on things that are not needed and commit that amount to your savings. Creating a budget helps here  as you could clearly track where your money is flowing, which allows you to make changes towards maximising your savings.

Organise financial records

It is essential to keep your financial paperwork up to date, especially if you are self-employed. Lenders usually check the records of your account and tax payments for at least the past 2 years. It is best to organise your financial statements before you visit a lender to apply for the mortgage.

Source additional income

Your home loan amount can be increased if you have another source of income, like earning an extra income in addition to your main job. It could be anything from getting rental income, tax refunds, side-hustle or income from doing multiple jobs.

Take joint loans

Choosing to take joint loans with your partner can help you to maximise your loan amount. A lender will consider the incomes of your partner and you, which helps in getting a higher loan amount.

Getting help from family

Using a guarantor like your parents or a family member or you can take help from the family offset mortgage. The lender will assess your guarantor’s financials and may offer you a higher loan amount. It is important to remember that in the case you are not able to make the payments, your guarantor will be liable to pay off the loan.

Use a broker

The expert mortgage brokers at Accord home loans can guide you through the loan process. Our team will help you to choose from various offers to match your requirements.