There is a lot to finding the right home loan lender in New Zealand. It’s not just about the cashback or the current interest rate; there are several crucial factors to consider. It is a decision that will impact your finances for years to come. Aseem Agarwal, Head of Mortgages at Global Finance, talks about some aspects that go beyond the immediate drawcards that you should consider when looking to take out a home loan.
Seeing the long-term view
Aseem emphasises the importance of taking a long-term view. While the benefits of a cashback payment and slightly lower interest rates might be tempting, you need to think about what your situation may be like in the next five years or more, so the lender you’re choosing today will still be the right fit. How easy to deal with the lender, is also important to know.
1. Branch networks
Consider the branch network of the lender, especially if you rely on in-personal services. Aseem advises that proximity to a branch can be important for services such as cash withdrawals and inquiries.
For example, if you’re considering taking out a mortgage with a particular bank, and you feel you will be quite reliant on physically visiting a branch, then check the locations of their branches and ATMs in relation to where your home or place of work is or will be. You also need to check the range of services available at branches, such as mortgage consultations and account management.
2. After-service and help centres
Another point to consider is the communication channels provided by the lender: do they have efficient phone and after-service support and what are the opening hours of the help centre? I think we are all aware of how much time you can spend on the phone when calling a bank. Typically, the wait time could be anywhere between 30 minutes to 45 minutes, depending on which hour of the day you are calling. Aseem warns that a seemingly attractive deal might lose its appeal if response times are poor, the helpdesk only operates during weekdays or has limited hours during weekends that don’t suit.
3. Relationship management
Aseem also suggests you look at how the lender manages relationships post-mortgage signage. He distinguishes between lenders who assign a relationship manager and those who don’t. Having a dedicated contact person can streamline ongoing needs as they can offer additional support beyond the help you will get from the mortgage advisors at Global Finance.
4. Repayment flexibility
Not all lenders offer the same flexibility in repayments. Some allow lump-sum payments without fees, while others have restrictions. Aseem recommends choosing a lender that aligns with your potential to make additional payments, especially if you expect windfalls like bonuses or commissions.
5. Loan Structure
Evaluate the flexibility offered in loan structures. Different lenders provide various options, such as revolving credit, account linkage flexibility or offset accounts. Aseem says you should consider whether you want to manage funds across different accounts and, if so, select a lender who will accommodate you.
For example, you may prefer to have finances in distinct accounts or save for different purposes, so can you link multiple savings accounts to your offset loan account? With an offset loan, you can spread funds across multiple accounts with the same bank. By linking savings accounts, whether from a partner, parents, or other family members, you can minimise interest payments because your lender still considers all the savings or funds you hold and deducts this total amount from your loan before calculating interest. So, if you have a $500,000 home loan and $10,000 stashed in various savings accounts, your interest is calculated based on the reduced amount of $490,000. The interest you save is typically higher than the interest you would have earned on savings, which makes the offset worthwhile in the long run.
6. Cashback terms
Aseem highlights the importance of understanding the terms of cashback offers: the commitment period and any penalties associated with early departure. Some lenders apply a pro-rata repayment to cashbacks. In the case of unforeseen circumstances, such as having to sell the property and pay off the loan because you are moving overseas, or if the property becomes unsuitable for you, this offers a degree of flexibility, so may be the better option.
Basically, a pro-rate cashback is calculated proportionally based on the time you are with the lender. For instance, if a bank offers you a $2,000 cashback for a five-year commitment period and you decide to leave after three years, the pro-rata calculation would be based on the three out of five years completed. This is unlike a fixed cashback which remains constant regardless of how long you stay with the lender: you leave early, you pay the whole lot back.
How to find a good deal on your mortgage
As Aseem puts it, choosing the right lender is about much more than just the cashback or the current interest rate; it’s about looking after your financial future. While a cashback mortgage can offer short-term advantages, Aseem stresses the importance of considering the overall terms, structure, flexibility of the loan and after-service from the lender and not just lower interest rates and cash back. If you calculate, these things will give you only a little advantage, but other aspects can save more in the long run.
If you’re in the market for a mortgage, reach out to Global Finance on 09 255 5500 or info@globalfinance.co.nz for expert advice. Our financial experts can guide you through the process of choosing the right lender. They will ask you the right questions, analyse your financial situation, and examine each home loan with you so you can make an informed decision. Together we can suggest a home loan that is structured right for you. Global finance through right loan structure has saved interest in thousands of dollars in hundreds of cases successfully.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.