- Hello, it's Connie from Prosperity Finance.
Sharing the best of financial tips
so that you can be more successful
with achieving your financial goals.
Now, recently,
you probably heard some news about a shortage of tempers.
It's just a scale of the people who are in the process
of building the family home or rental property.
Now I am one of them.
I'm building my new home.
Luckily, I'm still in the design stage,
so I'm not really experienced that
but I hope this can be resolved as soon as possible.
Well, there's good news here.
Now recently ASB has launched
a new products designed for building a new property.
Can be your home or rental
or you can just purchase new build.
That product's called, "Back My Build."
Now the beauty of this product is that
you can have access to
a very special variable rates of 1.79%.
That's huge discount
from their standard variable rates of 4.45%.
So it's a significant saving,
and you can have that special rates
up to 36 months from initial draw down.
Now, the purpose of this product is to encourage new build.
Now ANZ recently also introduced their new policy
about how they recognize rental income.
in line with the recent
government interest deductibility rules
but they have exclude the new build from the new rule.
So you can see the trend
that banks are more kind of in favor of new build.
So ASB so far is the only bank
that introduced this special rates for new build.
But I believe other bank more likely
to follow in the near future.
So if you not bank with ASB,
or you can't borrow from ASB,
you don't want to borrow ASB,
but you are about to build your new home
or investment property.
Or you have existing package
that ready to settle in the near future,
then stay in tuned because other banks
might offer similar product in the near future.
So what are the benefits?
The number one benefits
is obviously save your interest costs.
Now, as I said,
it's a significant interest discount.
So, you know,
I just talked about the interest deductibility.
Now, if you have some rental property
that were affected by
that interest deductibility rule.
And you are building your new investment property,
this low rates,
even though, it's only lasts for a couple of years,
it will offset the negative cashflow
in your other investment property.
So it's definitely a bonus from the cashflow perspective.
Now, even before the construction finish,
now you probably built your new home or investment property.
But on the other side,
you still paying rents or you can't rent out
your existing house or you can't get the new rent
from the new built.
So having a much lower variable rates
that can help you reduce a lot of cashflow outgoings.
So it's definitely very welcome products.
Now, if you are in the process of drawing down
your construction loan with ASB,
you can convert your standard construction loan
into this new products, Back My Build,
and enjoy the low rates.
Or if you are borrowing at over 80%,
normally, you don't get much discounts.
But in this case,
you can still have access to these super low interest rates.
But ASB will charge you additional rates,
it's called, LEP, low equity margin.
That margin depends your LVR ratio.
For example,
if you borrow between 80 to 85,
that LEP margin is 0.3%.
And if you borrowing between 85 to 90, that's 0.75.
But either you add that on,
is still super savings.
So it's a still good,
very good products and apply to all kinds
of a new built in terms of investment purpose also
and high LVR type of lending.
So,
a lot of people can enjoy this benefit.
Now, since the product was launched,
there are some questions
which I think might be relevant to you.
So I want to share with you any catch
or any special kind of they're small fine print.
So you can be aware of when you make a decision.
So firstly, it is a variable rate.
So that means the rate can change at any time.
Now the current variable rates for this products
is 1.79, but it can change.
Okay, so there's no guarantee.
But in my view the variable rates
probably stay like this level or you know,
only increase very small percentage
over the next year or two.
So, but just let you know,
it is no guarantee, okay.
at this low rate.
And there's no cash back for accessing these products.
Unlike you borrowing for standard products,
you get cash back on the new lending amounts.
But in this case,
there's no cash back.
Unless
you have a plan or intention to build
a six Homestar rating house.
Now to get that rating,
your builder needs to apply for that assessment.
Once it's done,
and it's proved to be a six or higher level,
then you can have up to $2,000 cash back.
So that's about that cash back catch.
So there's no cash back unless it's a six Homestar rating.
You also need to pay a application processing fee of $400
in order to have these products.
So that's additional cost.
And again, I mentioned about the low equity margin.
So that will be add on top of that special rates of 1.79.
So it is additional interest rates,
but again probably not much higher
than the standard or other banks home loan rates.
So it's not really a big burden,
but just let you know not everyone can get 1.79.
Now this product doesn't apply to just buying a vacant land.
Now you probably just purchased the land
and then you engaged with your architects
and get the consent, et cetera.
So at this stage,
the loan for the land is at still standard pricing.
You can't use this special interest rates
but once you start getting the construction loan
you will be eligible for these products.
Just let you know,
the land is not.
And this product is not applicable to renovation
despite the size of the renovation.
And if you fall under the commercial division at ASB
then the rates do not apply.
Now normally,
if you are in commercial division,
that could mean you are building the property
and then for the intention for sale.
So like you are a builder or developer,
then you can't have this rates.
Or you want to hold the new build
but the new build have multiple drillings.
It's not the retail products.
You have to be referred to commercial as well.
Or you are building a commercial property.
These rates is not applicable to commercial property.
Now last point is if you are building or buying a new build
or building an investment property,
then ASB can only give you 25 years loan term.
So what does that mean is,
potentially you can borrow less than other banks.
'Cause other banks give you 30 years.
So without the extra five years
your borrowing capacity can be significant reduced
if you go to ASB, okay.
Also, I recently had a client
who about to settle off-plan apartments
and the apartment is for investment purpose.
So she's eligible for this product
but she has to pay principal and interest
on the 25-year loan term.
So the repayment amount worked out to be more than,
you know, if she borrowed from other banks
at 30-year long term at 2.25%.
Just because of a shorter loan term
and she's paying principal interest.
So the repayment amount is more.
So she was not too sure if that's suitable for her
'cause she's not comfortable with that level of repayments.
But again,
it is more for investment property type.
If you are homeowners,
then there's no difference.
So you end up saving you paying less for your payments
because the rates is lower
and you still get the 30 years of loan term.
Now I also asked by people saying,
what about other banks?
Do they have that products?
Well, as it today,
unfortunately, no.
ASB is only bank they offering this special rates
for the new build.
But I believe other banks will follow in the near future.
I just don't have that timeframe.
So just stay in tuned.
If any updates about this policy
I will do another video for that.
Okay, so don't be desperate.
But the trend as I mentioned,
is banks are more in favor of new build.
And they will use a lending policy to reflect
these benefits of having a new build.
So it is indeed a good news for people
who want to build a new property or buy a new property.
If you want to inquire in more detail
and see if this product applicable to you,
or anything you need to be aware of,
feel free to get in touch with us.
And we are more than happy to give you a tailored device.
Thank you so much.
I will see you next time.
Bye-bye.