In New Zealand first home buyers find it particularly difficult because of the very high cost of housing. Apart from the small towns in rural New Zealand first time buyers are faced with taking out an enormous mortgage for what can often be a substandard property, and then they are saddled with massive monthly payments for many years which may prevent them from making any improvements to that property.
This is a fairly daunting prospect to virtually every first home buyer, and many simply procrastinate rather than take that all important step to purchase their first property. A very good first step, once they decide that perhaps they should look at buying a house, is to contact a good mortgage broker to find out just how much they can borrow, how much they can expect for repayments and what is a safe size for their mortgage. For these types of queries it is probably best to talk to an independent mortgage broker, who is much more likely to give them good sound advice and not just simply tell him to go elsewhere, as these people are very obviously potential new clients.
A good mortgage broker will provide a number of services, and for the client these services are almost always free, as the mortgage broker gets paid a commission by the bank. The obviously most important service for these clients is good sound advice. Fortunately for clients the New Zealand the mortgage broking sector is tightly regulated so that all mortgage brokers are fully qualified financial advisors, and are all members of high quality dispute resolution process, which means that clients can generally expect quality and independent unbiased advice.
Mortgage brokers could also provide a counselling or coaching service to help their a clients get the confidence to take the next big step. Brokers find themselves regularly reminding clients to complete and send in particular forms and details, and regularly advising clients that the prospect of the mortgage is not too scary and is more manageable for them then they may think (for more information visit www.nzmortgagebroker.net). In the end it is always the clients decision whether to proceed or not, but a good mortgage broker can help them get over the line, and of course everyone knows that once they do own a property and are starting to pay down the mortgage then in New Zealand this means they are starting a very good base for their future wealth.
In some cases customers find themselves in a situation where the banks are not prepared to help them and they are struggling to make their mortgage payments. This can impact ordinary house owners and property investors alike, and is generally a very scary and stressful time for the families involved.
Often these customers have arrears on an existing mortgage and no apparent way to catch up with the arrears and continue with the particular arrangement. There is a small group of mortgage brokers that specialise in helping these customers, and these mortgage brokers can find this little market segment very lucrative if not a little bit of extra work.
These customers generally are not in the position to pick and choose any deals that are offered, and so the success rate for the brokers that are able to find a solution is generally a lot higher then for the normal mum and pop customers. Around 70% of Mum and Pop borrowers do not go through with the deal, and all the hard work by the mortgage broker just goes to waste. Distressed customers on the other hand are desperate for a solution, and so not only is the broker getting a much higher percentage of completions but they are also generally getting larger mortgages for the customer than for the average mum and pop customer. The optimum solution for the distress customer is often a refinancing and loan aggregation solution, and these are almost always expensive. For the best mortgage brokers in Dunedin click this link.
In many cases the brokers will not use a bank but will instead use a non Bank lender or a high net worth investor who is prepared to take a somewhat larger risk with their money but obviously at a higher interest rate. Distressed customers are generally not in a position to quibble about a higher than normal interest rate, as all they are really wanting is a good solution that doesn’t involve them going bankrupt or losing the family home for example. Broker commissions may not be as high as they are with a Banks, but with the completions being much higher and the loan size being much higher for these brokers these deals are generally a lot more lucrative.
Brokers who specialise in this market will need to have carefully placed advertising and use Google AdWords to attract stressed customers, and while they may not see as many customers come through their door as might the large mortgage broking company that specialises in the mum and Pop customers, for the broker their business can be very profitable in terms of revenue per time spent.
Developers for commercial projects need the appropriate financing at the appropriate stage of the project, and while some may have a very good relationship with one bank, in most cases they will use a specialist mortgage broker. They will have a good relationship with their chosen mortgage broker and will trust the mortgage broker to do the right thing at the right time.
Danika Schulman, mortgage broker
Any commercial development proceeds as a number of different stages, with the first stage obviously being the purchase of the land which may even have an existing building they intend to knock down or significantly remodel. The financing for the purchase of the land will preferably be reasonably short term as the developer will almost certainly be selling the property at the end of the project. At this very early stage the project will have a relatively high degree of risk, and the mortgage broker will need to find a financier who is comfortable with this level of risk. This will almost certainly not be a normal bank but will instead be a second tier lender or even a collection of high networth individuals, and the lending will naturally be at a significantly higher price than the normal bank lending rates. For mortgage brokers Bay of Plenty click this link.
Once the land has been purchased then the developer will want to get all the planning and consents underway and completed as quickly as possible, and they will need some funding for this stage. The level of risk stays high until the final council consents have been received and the developer knows that they can go ahead, hopefully with the original plan which also has the original projected financial return.
When the planning and consents are complete then the developer will want to start work, and they will need more specialist finance via their mortgage broker, which will be paid out during the various milestones of the project. The financing at this stage may be deemed to be a lot less risky than at the land purchase stage and the broker may be able to get a much better deal for the developer and perhaps even roll in the land purchase (and pay off the expensive loan). As the development project proceeds more commercial interest will be paid by potential customers, and it is quite possible that the developer well actually sell most or all of their development even before the project has finished. This can be very lucrative for the developer, as the purchase price can be multiples of the cost of building and land purchase depending on the market conditions at the time. Even better for the developer, they get to pay off all their finance a lot earlier and save on the financing costs. While the developer is the one that takes the risk, its the mortgage broker who’s the brains behind the financing, but this can be very lucrative for the mortgage broker given the size of the loans that they have arranged.
If the mortgage broker is very smart then they may be able to arrange for the purchasers of the property to use them for their financing as well. There are understandably a few very wealthy mortgage brokers in any business community. For more information visit NZMortgageBroker.org.
Residential developers are a rare breed in New Zealand, as they need to have a high degree of confidence that the houses they build are going to sell quickly and for a good price. They need to have a very good team around them including urban planning specialists, very good architects and very good builders and landscapers. Click here for Nelson mortgage brokers.
Sarah Watts, mortgage broker at MortgageBrokersNZ.org
Once a residential development company gets this good team then they can become extremely successful, and there are a number of development companies up and down New Zealand they have been well known and successful even for decades. Generally the leadership of these companies is dominated by one or two very experienced developers who deeply understand the residential housing market in their areas, and have extremely good connections with the local council including the urban planning and consenting departments and the political leaders. This will ensure that the developers know where the market opportunities are in their local area, and what the planning requirements are and what they need to do to avoid any problems. Good developers work to a steady process where they have a number of projects on the go at the same time but at different stages.
One very important member of their team will be the specialist mortgage broker who makes sure that the appropriate finance is available at the appropriate time for all the projects. This can be quite complex where a number of projects are on the go, as the financing will need to work around the various stages of each project up to the time in the house is sold and paid for. Successful developers may even have sufficient cash reserves that they can finance their own developments, although many may prefer to borrow the development funds rather than risk their own money. The financing the mortgage broking obtains may be temporary finance that last as only long as each project, or it may be a more permanent large fund that can be used like a very large bank account with a large overdraft.
The specialist mortgage broker can also win business by providing finance to the new homeowners who are purchasing the properties, and so this role can potentially be extremely lucrative. A very good mortgage broker who keeps the developer very happy can also find themselves being the go to mortgage broker for the developer’s real estate agent. Interestingly for the mortgage broker, their income is from commission only, but the size of the commission for a mortgage for a modern new home can be well over $3,000, and yet may only require 2-3 hours work.