OPINION: Make no mistake, the first half of 2020 has been an unprecedented, wild ride. A lot of New Zealand small business owners have been impacted by financial hardships, loss of income and an overall feeling of uncertainty due to Covid-19.
These financial difficulties can make it challenging for them to successfully secure a mortgage from a traditional bank. At Southern Cross Partners, we know that over the next year, 22.4 per cent of Kiwis want to either buy their first home or sell their house and buy a new one.
Covid-related financial woes may contribute to increased mortgage declines by banks, effectively stamping out people’s ability to purchase real estate through traditional banks.
Concerningly, we found that half of all New Zealanders (50.5 per cent) wouldn’t look elsewhere for funds if they were declined by the bank.
But it doesn’t have to be this way. Get someone batting in your corner and seek out a mortgage advisor who knows the financial marketplace, knows how to frame up your application best, and who can shop around to find the most suitable option for your situation outside the banks.
But first things first – what’s an advisor? The simplest definition is someone who arranges for the purchase or sale of goods/services on someone else’s behalf. Easy enough. And a mortgage advisor does the same thing, but to help Kiwis achieve their property goals even when the bank says no.
The advisor market in New Zealand is full of people who have spent years learning the environment, putting them in a good position to give you the right advice about what options are available to finance your dreams – property or otherwise.
Navigating the mortgage market on your own can be a difficult experience – especially with everything else Kiwi small business owners have to deal with – which is where advisors come in. You’re paying them for their expertise, experience and to alleviate the stress of mortgage hunting.
So, there are a few things you should ask your advisor.
What are your qualifications?
Naturally, you want someone who is authorised and legally able to work on your behalf in the New Zealand finance industry. Ensuring they’re registered, accredited and on the Financial Service Providers Register is essential.
What lenders do you work with?
Asking for an idea of how many different lenders they work with and how much variance in opportunities there are for you is crucial.
Just under a third of Kiwis (30.6 per cent) believe advisors liaise with multiple organisations to secure the best deals, which is why it’s important to ask upfront what lenders won’t be included so it’s clear what you are comparing.
After all, you want to make sure they’re investigating and entertaining all suitable finance options including bank and non-bank lenders, including peer-to-peer lenders.
How do you charge your fees?
Most advisors will earn a fee from the bank/lender they secure a mortgage through. But while mortgage advisors may be paid by banks, they work for you.
Don’t be shy to ask how they’re paid and what commissions they’ll receive from different banks and lenders for their loan recommendation. It’s in your advisor’s best interest to find a mortgage that suits your finances.
What happens if the banks won’t lend to you?
Fear not, this isn’t the end of the world. Mortgage applications are declined by banks for a wide range of reasons – including unsteady income (such as self-employed individuals) or disrupted finances (such as those impacted by Covid-19).
Even before the Covid-19 pandemic, 20.8 per cent of people thought banks were already too tough when it comes to giving mortgages.
And after the pandemic? Over a quarter of New Zealanders (26.5 per cent) think it will be harder to get a bank loan.
But this is where your advisor working with a diverse group of lenders pays off. Non-bank lenders can offer home loan products on different terms to help people achieve their property dreams.
Furthermore, peer-to-peer lending companies like Southern Cross Partners specialise in bridging loans, giving Kiwis the chance to borrow for their mortgages directly from investors.
The benefit of this gives people breathing room to address the reason why they were originally declined by the banks, before moving their mortgage back to a traditional bank set up.
At the end of the day, it’s important to remember your advisor works for you. They are your advocate. So ask questions and get comfortable with what they’re offering.
There are plenty of great advisors and you deserve to understand what’s going on and to sleep easy knowing they’re going to provide you with the best financial option for your circumstances.
Cameron Harper is the head of sales and marketing at Southern Cross Partners