- Hi, it's Connie from Prosperity Finance.
How are you doing?
Finally, finally, we finish lockdown
and things start backing to normal.
For us, we going back to office on Monday.
My daughter going back to school on Monday too,
so we finally,
this day arrived.
But make sure we all keep distance.
Take our responsibility,
make sure we keep that COVID-19 under control.
So, well done on getting to this stage.
Now, in this video,
I thought I'll just do a update on some bank policy changes.
There are some major changes.
Also, I just discuss about the options,
repayment option for people
who taken the mortgage holiday or deferment,
and if now you feel like it's time
to going back to the normal payments,
what are the option available for you?
So, there's a lot of information.
So, please stay with me till the end.
So, firstly, let's talk about people
who has taken mortgage holiday
or convert from principle and interest
to interest-only options.
Now, if you think your cash flow okay,
you comfortable to go back to the normal payments,
you can finish that early.
In fact, I encourage you to finish early, if possible,
because you can save a lot of costs down the track.
Now, if you want to do that,
you generally have two options.
One is you pay more than before,
so that you can catch up the loan term.
For example, before the,
sorry, the deferral option,
you probably have 20 years to go.
And now, if you want,
make sure that you still have 19 years and 10 months to go,
you have to catch up that payment
to keep that loan term the same.
But not everyone can pay more, right,
especially not, some people still getting 80%
of their normal pay.
Now, the other option would be keep the same payment,
but you may have to extend the loan term.
It really depends your loan structure.
Now, if you've been paying the minimum,
which is 30 years loan term,
then, unfortunately, you can't extend it.
You just have to go with the option one,
which is to pay more.
But if you were paying faster than the 30 years,
then now you can choose to pay same repayment
or even lower than what you used to pay,
because you pay faster.
So, you can extend the loan term.
Right, so basically you have these two options.
There could be a third option,
but they only happen to loans,
if they're coming off fixed-term,
'cause now the rates are much lower than before.
So, even you had to increase payments as a result
of taking the mortgage holiday, or interest-only period,
but the rates also drop,
so it's kind of a net off each other.
So, that way you can choose to pay the same,
without extending the loan term.
So, basically, you have these three options.
If you don't know which one is right for you, contacting us.
Now, there might be some people, job still not improve.
The income still uncertain, and you probably running out
of the mortgage deferment, or interest-only period,
if you had less than six months
in your deferment application,
you can extend it up to six months now.
So, have a look your situation and see what's right for you.
Right, for people who now ready to buying property again,
here are some update about bank policy changes.
There's some good news and some bad news, unfortunately.
Good news, I would say the interest rate has dropped, right.
All the banks has almost adjust their rates.
Some adjust one-year rates, some adjust two-year rates,
but every bank has adjusted rates.
Now, at the moment the lowest rates
for one year and two years, 2.79%,
depends on which bank you talk about.
The highest would be around 3.05%.
But again, to make the good decision
for your interest rates,
you also had to take into account your personal situation.
And also, how you repays is equally important.
I will have a separate video about the interest rate update,
but I just want to give you a update.
Interest rate has dropped.
So, that's good news,
because your finance cost is going
to be much lower than before.
The other good news is that some banks,
during the lockdown, only assess the customer application
for their own customer,
meaning your income need to be with that bank,
cause they have limited resource.
They have to dedicate a lot of the time looking
after mortgage deferment applications, et cetera.
Now, the capacity has been improved,
so they start looking at new-to-bank customers.
So, that's welcome news.
Now, let's talk about the downside.
So, bank has tightened up some policies.
So, what are they?
In terms of income, like ASB,
can only take into account one boarder income,
regardless how many you are getting right now.
And BNZ, they won't consider any boarder income whatsoever.
So, that's really sad news.
Cause normally one boarder can give you
between 80 to 100K of borrowing capacity.
So, without that, your borrowing capacity
from surfacing perspective,
is going to reduce dramatically.
Now, not every bank has this kind of,
tightened up the boarder income policy,
but we've seen two banks doing that.
So, if you want to get a pre-approval now,
you have to be really quick.
Now, in terms of your job income,
if you were impacted by COVID-19,
and your income was reduced during the lockdown period
and now it's improved,
you need to get employer letter
to confirm your ongoing income,
so that bank get a comfort
about your ongoing servicing ability.
So, that's the income side.
In terms of LVR,
we don't see any major changes in terms of LVR improvement.
I heard Kiwibank allow you to borrow up to 80%
for investment property,
but most of the bank hasn't increased LVR
for investment loans.
And, in fact, this is going backwards.
We got notice from BNZ that some of the exception
to LVR rules, such as construction loan,
or off-plan property, or refinance,
which are actually used to be exempt from LVR rule,
now they also need to be within 70%,
if it's an investment property only.
So, it's actually going backwards.
And for apartments, construction loan,
some bank also reduce their LVR to 65%.
It used to be 70 for investment,
or construction is LVR exempt, but they are going backwards.
It's a reflection of the current property environment.
There's a lot of uncertainty.
So, that's why when I did my LVR removal
commentary video last two weeks,
I predict that the bank probably wouldn't do anything
at the moment to relax LVR,
because we are in the COVID-19 environment.
There's just a lot of risk for them to increase LVR.
So, that's the investment property loan,
but for first-home buyers, there are good news.
Before the LVR removal, you may not be able
to get a pre-approval, you have to find a live deal.
You sign a conditional offer,
and then go to the bank and get it financed.
If you don't buy that property, your offer avoid.
But now, because there's no limitation
how many loans can go over 80%,
banks start opening the pre-approval for high LVR, right.
So, that's good news.
But you still need to have a 10% deposit most of the time.
There's some exception, you can get away with 5%,
but majority still need 10%.
I don't see a game-changer here,
because before the LVR removal,
if you have a good income, you can borrow 90%.
So, there's just no change.
So, that's about LVR.
So, in general, bank are very conservative.
And they will review their policy
as things start to settle down.
And they will constantly review and provide update.
So, same here.
We'll give you update in the first instance
if we hear anything.
So, please subscribe off our YouTube channel or our blog,
so that you can get this information directly,
immediately from us.
Right, thank you so much for watching.
I hope you get some value from this.
And if you think someone else would benefit from this video,
please feel free to spread the love.
Thank you, I'll see you next time.
Bye-bye