Mortgage Finance

So, what are home loans and mortgages?
Seems obvious, but it's good to know the difference between a mortgage and a home loan – after all, a home is the largest purchase you're likely to make in your lifetime! A home loan is finance provided by a lender for the purchase of a home. Your loan will be secured against your house; this means that you won't be able to sell your home until the loan is repaid. Your mortgage is a form of security which gives the lender the right to repossess your property if you do not repay your loan. Discuss your options with a New Zealand mortgage expert.

What can a New Zealand mortgage broker do for me?
There are a variety of home loans and mortgages out there: an NZ mortgage broker can offer independent advice on the types of loans available from a number of different lenders. They will find the best mortgage finance for your situation and needs. The advantages of using the services of a mortgage broker are:

• It will save you time and effort shopping around for mortgage finance deals
• You'll be offered finance options from a range of lenders
• Your broker will be committed to working in your interests

Check that your mortgage broker is a member of the NZMBA (the New Zealand Mortgage Brokers Association).

How much mortgage finance will I need?
Only borrow what you can afford. By using a nifty mortgage calculator you can work out if your income will cover your mortgage repayments. Your New Zealand mortgage specialist can help you prepare a budget before arranging finance for you.

What mortgage interest rates are available?
You can choose between a home loan with a fixed interest rate, a floating (or variable) interest rate, or a combination of the two:

1. Fixed interest rate: your interest rate is fixed for a period of time between six months and five years, at the end of which your loan will need to be renegotiated. The benefits are:

• You know what your repayments will be for that period of time
• Rates can be lower than floating rates
• You'll enjoy lower rates if interest rates are on the rise

But...fixed rates may charge you if you make lump sum payments, and floating rates may fall below your fixed rate if you have chosen a long term loan.

2. Floating interest rate: your interest rate will fall or rise according to changes in the market, meaning your repayments may change. The benefits are:

• You can increase repayments and make lump sum payments without paying any extra fees
• You can consolidate other debts into your mortgage (allowing you to pay a lower interest rate on all your debt)

But...floating rates can be higher than fixed rates, and changes in the rate can mean your repayments increase and alter your household budget.

3. A combo of fixed and floating interest rates: for the best of both worlds, you can split your loan between the two rates, making lump sum payments on the floating rate loan and getting lower interest rates on the fixed rate loan.

How can I make home loan repayments?
There are options to suit your situation:

1. Table loan: you choose a term of up to thirty years, with repayments initially paying interest and later paying off the original amount borrowed. The benefits are:

• Regular payments
• Set date when loan will be repaid
• Available on a fixed or floating interest rate

But...you'll need a regular income if you're committed to regular repayments.

2. Revolving credit loan: you can re-draw money up to your home loan limit at any time, giving you easy access to extra money if required. The benefits are:

• You have an 'overdraft' which allows you to borrow further, up to your original limit
• You can make repayments as much as you like, letting you pay off your mortgage faster

But...you may take longer to repay your mortgage if you can't resist the temptation of re-drawing money.

3. Interest-only repayments: you do not have to repay your loan until a certain time (usually up to five years). Until then, you make payments to cover the interest which your loan incurs. The main benefit is:

• You have money available for home renovations and other household expenses

But...at the end of the arranged period you will still owe the initial amount borrowed.

Looking for more information? Find New Zealand mortgages in the NZS.com directory.

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