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  Reply # 2161022 14-Jan-2019 15:46
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Along these lines: if I was gifted a deposit I wanted to use to buy a property, how can I avoid the very issue John has encountered here? Would I be best just to go through a broker? How much do they typically charge?

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  Reply # 2161024 14-Jan-2019 15:49
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quickymart: Along these lines: if I was gifted a deposit I wanted to use to buy a property, how can I avoid the very issue John has encountered here? Would I be best just to go through a broker? How much do they typically charge?


Brokers don't charge the borrower anything, they make a commission from the lender.

Main implication of this is that there is usually a condition that if you settle the loan within a short time frame (1-3 years), they may lose that commission and you may have to pay it back to them.




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  Reply # 2161028 14-Jan-2019 16:10
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ajobbins:
wellygary:

 

I suspect the days of front line bankers ( or even their managers) actually having much discretion has long gone and its simply a case of

 

 

 

"The computer said No..." 

 



Another reason brokers can be an advantage. They have access to back office team's directly - people who have actual decision making authority.

Crazy that frontline staff of the actual lender don't seem to have this access, but seems to be the case.

 

 

 

With all due respect Andrew brokers don't have access to the credit team of the bank. Brokers either communicate with the credit assessor in the broker channel of the bank who process the application for the broker or their Relationship Manager. Majority of the times the application may be approved at the credit assessor level however if the application is referred to a credit manager who are a part of the decision making team the brokers can't talk to the directly however the lender can. The lender in this case have got it horribly wrong as I pointed out to John from the very beginning. You can never be penalised for having too much deposit. 

 

To add to it I work as Mobile Mortgage Manager for a bank and a lot of times I get customers who were mucked around by the broker for days. When we look at the application it becomes obvious that the broker didn't even have the facts right and presented half the information to the bank. The credit assessor goes to credit with the limited knowledge and application gets declined. When we then look at it and meet the customer more information comes to light which can be used and a lot of times the application ends up getting approved. There are some amazing front line staff at all the banks and likewise there are amazing brokers. Similarly there are cowboys on both the sides who don't know what they are doing. 





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  Reply # 2161029 14-Jan-2019 16:11
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Linux: Just got off the phone to the reserve bank and they confirmed my bank has it wrong

Andrew little has also confirmed no such policy

John


I bet that what I said earlier was true - That there was some silly new rule. And the government quickly repealed it as it would be very damaging politically if this story had ended up in the papers.

It might not even have been an explicit rule, but instead a bureaucrat in the Reserve bank, who doesn't know what they are doing. Who in turn told the wrong information to the OPs bank. And who didn't want to admit that they were wrong until the government started asking questions and told them to make this problem go away.





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  Reply # 2161033 14-Jan-2019 16:21
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I'm a bit late to the ball here but there are a few questions about how long to wait between a gift and the application being submitted and I thought my experience might be of use. Albeit a few years old now anyway.

 

We were gifted some cash for our first home, too. Our broker advised us that we needed to submit three months of banking transactions and we should wait until the gift was not on the list. He described it not because it was a gift necessarily but because it would fatten our savings and appear that we were more competent at saving then in reality. We simply hadn't been saving long but were conscious of how fast things were moving at the time. 

 

We were not interested in using our current banks at the time so the fact we had had the gift for 32 days didn't matter as the other banks didn't have our historical data. 

 

The above might not make any difference in today's market so take it all with a healthy heaping of my own ignorance.

 

*shrug*


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  Reply # 2161034 14-Jan-2019 16:25
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Linux: Just got off the phone to the reserve bank and they confirmed my bank has it wrong

Andrew little has also confirmed no such policy

John


@Linux So what does this mean - that your loan is back ‘on’ - approved?

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  Reply # 2161035 14-Jan-2019 16:27
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jonathan18:

Aredwood: ... Even though the repayments would have been less than what they were currently paying in rent. How does paying less money make something unaffordable?


I'm not trying to say that some of these calls by banks aren't counter-intuitive, but it's important to acknowledge that the cost of owning a home is so much more than simply the mortgage payments, eg (off the top of my head):



  • rates - that's typically another few thousand a year.

  • repairs and maintenance; NZers are well-known for skimping on the latter, and on average spend way less than the amount recommended (I think it was BRANZ had a figure?); the former can be significant and can occur with no warning, so if a home owner doesn't have the money available when needed...

  • (relative over?)spending on non-critical renovations or redecorating...


 



I'm not denying that there are extra expenses apart from the mortgage payments. But even with renting, there is always the risk of having to move at short notice. (moving expenses) Rent increases. And needing to be able to pay the bond and rent in advance on the new house, before the bond refund from the old house gets paid back to you.

Assuming that you did your homework before buying, I can't think of many major ”out of the blue” expenses that you couldn't have foreseen. And which would also cost more than a few thousand dollars to sort out.

Yes, interest rate increases are a big risk also. I managed that by initially taking a 4 year fixed rate. Certainly of payments in the early years. And your income would probably be higher in 4 years time to help manage any jump in repayments. (I actually broke my fixed rate agreement after 2.5 years or so, as interest rates started dropping a lot due to the GFC). And unlike rent increases, if interest rates increase, they will eventually drop again.





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  Reply # 2161061 14-Jan-2019 17:29
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Wheelbarrow01:

 

If it's any consolation, two mates (who are brothers) and I had an awful time trying to get finance to buy a holiday home together around 18 months ago.

 

 

 

The banks hate these. And it's not the affordability. It's the legal wrangling with spouses and then break ups that cause the banks the headaches. If the third person misbehaves, the bank can't slice a third off.

 

They were called Brady Bunch deals, usually where Mum and Dad and one of the kids went all in together. 

 

I still think this whole thing has come down to John's portion of the deposit, outside the gift. Owner Occupied is/was 20% of his money, investment property is higher. I'm certain this will be the reason. The gifted money is simply ignored when assessing your loan application. Least that's how it used to be. 

 

And as I've said before, it would be worth asking the bank for a direct answer. And then finding out how long you need to hold the gift for. 


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  Reply # 2161066 14-Jan-2019 17:34
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wellygary:

 

Wheelbarrow01:

 

I know this is a completely different scenario to the OP, but the story does at least demonstrate that sometimes, when your application falls outside of what banks consider "the norm", they won't lend anything to you, no matter how much deposit and security you throw at them.

 

 

Agreed,

 

I suspect the days of front line bankers ( or even their managers) actually having much discretion has long gone and its simply a case of

 

"The computer said No..." 

 

 

 

 

I suspect the days of a bank manager having to visit the house to look at it first like they did in the 80's, are long gone. Banks have to lend money for people to buy houses, as that is how they make a lot of their money, so I suspect they have a lot of set rules, and people have to fit into a certain box. Anything that is outside that box I suspect creates a risk for them.


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  Reply # 2161067 14-Jan-2019 17:38
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Aredwood: Yes, interest rate increases are a big risk also. I managed that by initially taking a 4 year fixed rate. Certainly of payments in the early years. And your income would probably be higher in 4 years time to help manage any jump in repayments. (I actually broke my fixed rate agreement after 2.5 years or so, as interest rates started dropping a lot due to the GFC). And unlike rent increases, if interest rates increase, they will eventually drop again.

 

 

 

I think one problem where it could all end in tears, is that people and banks see houses as an asset, where they could also be seen as a liability depending on conditions. It is all fun and games when house prices increase, and people have jobs to service the debt. But when house prices drop, and jobs go it quickly changes. AKA 2007-2008 in the US.


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  Reply # 2161128 14-Jan-2019 18:53
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sidders80:

 

With all due respect Andrew brokers don't have access to the credit team of the bank.

 

 

That all depends on your broker.  Ours did because he used to work in the banking industry so has a strong network.  


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  Reply # 2161133 14-Jan-2019 19:12
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gehenna:

 

All this faffing around is why we went with a broker, a family friend though so it worked out very well and he got us a great deal.  I just couldn't be bothered with all the stress.

 

 

Absolutely. I was battling for a very long time to get a mortgage when the LVR rules were quite new. I went to all the banks I could find with >20% deposit plus 45k in KiwiSaver at the time, and strong savings records. A steady job earning around 80k a year at the time. I didn't want millions of dollars, I only wanted a little under 300K. This was my first home. I gave up after about 6 months of being told no, no, no.

 

I couldn't understand why, despite asking. All I could put it down to was that I was single, but they never confirmed this as being the reason?. There was no mention of getting any kind of repayment insurance though I did ask if this would help and was told that it wouldn't.

 

I never believed even a broker would help me, and I hadn't tried one. I was discouraged to by most people I spoke to. I have an aunt and uncle in real estate and they put me on to a broker they have used in the past and BAM. Gave him all my details, every bit of paper he wanted, I had a loan offer from the same bank I'd been with all my life but refused to lend directly. They paid the lawyer's fees and gave me a better rate thanks to the broker. About 2 weeks later I'd found my first home and moved in a couple of months later. 

 

Now I always encourage anyone I know who is looking for a home and needs a mortgage to give this guy a call or at least get in touch with a broker. Made it extremely easy. 

 

Sorry for going a bit off topic, just thought I'd share in case anyone else in a similar situation reads thru this post

 

 


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  Reply # 2161135 14-Jan-2019 19:16
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mudguard:

 

 

 

And as I've said before, it would be worth asking the bank for a direct answer. And then finding out how long you need to hold the gift for. 

 

 

Doesn't the gift need to be certified? That means its a gift, no payback liability for the bank to worry about. As good as cash.


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  Reply # 2161139 14-Jan-2019 19:25
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tdgeek:

 

mudguard:

 

 

 

And as I've said before, it would be worth asking the bank for a direct answer. And then finding out how long you need to hold the gift for. 

 

 

Doesn't the gift need to be certified? That means its a gift, no payback liability for the bank to worry about. As good as cash.

 

 

The point I'm making is that the bank knows (and they will work out if it isn't clear) that John in this case, hasn't saved that money. So they will be assessing the application based on the money he has saved.

 

I don't recall the certification process, I vaguely recall a gift couldn't be anymore than 10% of the deposit. But this may have changed. It is still not clear how much John is putting in, and he may not want to disclose that. I know some have argued that the money is now his and he can do what he wants with it, I'm not trying to be argumentative, but the bank I worked for didn't view gifts the same way.

 

If the house he is looking to buy is $500k, then I'm guessing the bank will want to see at least $100k (owner occupied) saved by John to go towards the application.


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  Reply # 2161141 14-Jan-2019 19:29
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mudguard:

 

tdgeek:

 

mudguard:

 

 

 

And as I've said before, it would be worth asking the bank for a direct answer. And then finding out how long you need to hold the gift for. 

 

 

Doesn't the gift need to be certified? That means its a gift, no payback liability for the bank to worry about. As good as cash.

 

 

The point I'm making is that the bank knows (and they will work out if it isn't clear) that John in this case, hasn't saved that money. So they will be assessing the application based on the money he has saved.

 

I don't recall the certification process, I vaguely recall a gift couldn't be anymore than 10% of the deposit. But this may have changed. It is still not clear how much John is putting in, and he may not want to disclose that. I know some have argued that the money is now his and he can do what he wants with it, I'm not trying to be argumentative, but the bank I worked for didn't view gifts the same way.

 

If the house he is looking to buy is $500k, then I'm guessing the bank will want to see at least $100k (owner occupied) saved by John to go towards the application.

 

 

Understood. So the LVR still applies, and a gift cannot replace the LVR minimum deposit.


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