Securing a mortgage can seem like a daunting process, but it doesn’t have to be. At OneStop Financial Solutions, we’re here to help you understand how to get a mortgage, and help make the steps involved more approachable and less overwhelming. 

A mortgage is more than just a loan; it’s a commitment that typically spans decades, making it important to get the right fit for your financial situation. There are different types of mortgages available, each with unique features, interest rates, and fees. 

From fixed and floating rates to a combination of both, understanding these options helps to find a mortgage that aligns with your long-term financial goals.

Your dream of buying a home is attainable with the right guidance and preparation. This post will give you an overview of how to get a mortgage, but this is not something you need to tackle alone. The team at OneStop Financial Solutions is always here to help. 

Starting the journey of home ownership is an exciting milestone, and getting a basic understanding of mortgages is an important first step. At OneStop Financial Solutions, we’re here to guide you through the complex aspects of mortgage financing.

Mortgages are loans specifically for buying real estate. It’s important to know about the different mortgage options available, as choosing the right one can greatly affect your financial health over the life of the loan.

Understanding interest rates is essential. The interest rate directly influences your monthly repayment amount and is a key factor in determining the overall cost of your loan. 

Getting familiar with the terms and conditions of your mortgage is important. These rules outline the legal obligations and rights of both you and the lender, ensuring a transparent and secure lending agreement.

Types of Mortgages

There are several mortgages to choose from, each with benefits and limitations.

A fixed-rate mortgage assures you of a consistent interest rate over a set period, which means stable repayments.

A floating-rate mortgage has an interest rate that can change, which may result in fluctuating repayments.

Another option is an interest-only loan, in which you pay only the interest for an initial period before repaying the principal.

Welcome home loans may also be available to approved first home buyers.

Interest Rates

The interest rate is what lenders charge you for borrowing money, and it determines the size of your regular repayments.

Your Loan Terms

Your loan terms dictate the rules of your home loan. Key details to consider include the time to repay the loan, which can range from 10 to 30 years. 

There can be penalties applied for early repayments or defaulting on the loan. Reading and understanding these conditions is essential, as they can significantly impact your financial commitments.

When applying for a mortgage, meeting serviceability requirements is essential. 

Credit Score Requirements

Your credit score plays a significant role in the mortgage application process. Lenders typically look for a credit score that reflects a history of timely bill payments and responsible credit management. 

If you have a lower credit score, don’t stress. We have options with non-bank lenders, and will explore every avenue possible to get you the right mortgage product.

Income and Employment Verification

Lenders will require you to provide evidence of stable employment and verifiable income. This could include recent payslips, tax returns, and employer contacts. They need to be certain of your ability to maintain a consistent income to cover your mortgage repayments.

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is a critical factor that lenders evaluate. It’s the proportion of your gross monthly income that goes towards paying debts. 

A DTI ratio below 36% is typically viewed as acceptable, though some lenders may allow for a higher percentage. There are some changes coming to debt to income ratio in 2024, we’ll have a video series coming on this soon. 

To calculate your DTI, divide your monthly debt repayments by your gross monthly income.

Choosing the right mortgage is key for your financial well-being. It’s essential to look at the different types of interest rates and how the length of your loan affects your monthly payments.

Fixed vs Floating (Variable) Rates

When looking at interest rates, you have two main options: fixed or floating. With a fixed-rate mortgage, your interest rate stays the same for a set period, allowing you to budget with certainty. 

On the other hand, a floating-rate mortgage means your interest rate will fluctuate with the market, which could lead to lower payments when rates drop and higher ones if they rise. Each of these choices has implications on the overall cost of your loan and your financial flexibility.

Repayment Period Options

Your mortgage’s repayment period, often ranging from 10 to 30 years, is another significant decision. A shorter term means higher monthly repayments, but you’ll pay less interest over the life of the loan. 

A longer term reduces your monthly costs but increases the total interest paid. Banks in New Zealand offer a range of mortgage choices, each with different term lengths and associated fees. 

At OneStop Financial Solutions, we’ll help you weigh up these options to find a balance that suits your long-term financial goals and current budget.

Our lead financial adviser and OneStop Financial Solutions director Matt Willoughby, has created a 100% free course for new home buyers to follow.

Follow along at your own pace and take advantage of our spreadsheets, calculators, and exclusive discounts on associated products. 

Getting a mortgage requires preparation, research, and attention to detail. Consider getting these documents ready before reaching out to our mortgage brokers.

Gathering Necessary Documents

Before you dive into applying for a mortgage, gathering all your financial documents is the first step. You’ll need:

• Proof of identity: Like your passport or driver’s license.
• Proof of income: Recent payslips or tax returns will do the trick.
• Bank statements: To show your financial activity.
• Credit history report: This gives insight into your creditworthiness.
• Proof of savings and/or your deposit: To demonstrate your financial readiness.
• List of current debts and expenses: To assess your financial obligations.

Using Our Mortgage Broker Services

A mortgage broker can make your journey smoother by:

• Assessing your financial situation: They’ll help you figure out how much you can realistically borrow.
• Searching for loans: Finding the right home loan to fit your specific needs.
• Managing paperwork: Helping with the nitty-gritty of application forms.

At OneStop Financial Solutions, our commitment is to offer you informed, personalized advice, leading you to a mortgage solution that matches your goals and financial situation. Rest assured, we are here to make securing your home loan as clear and beneficial as possible.

Filling Out the Application Form (We Can Help You With This)

When it’s time to apply, accurately fill out the application form. Make sure to: 

• Complete all sections: No blanks left behind.
• Provide accurate figures: Be exact with your income and debts.
• Double-check everything: A quick review can save you from potential delays or rejections.

 Accuracy on your application form is key to a smooth process, so pay attention to every detail.

In Auckland (or all of New Zealand for that matter), a property appraisal and valuation are NOT the same thing. 

Your lender will send a registered valuer to value the property when assessing your loan application. 

The value of the property can be different to the appraisal given by a real estate agent, or the purchase price of the home. 

A valuation should reflect the property’s condition and cannot be substituted with electronic appraisals alone. 

For a comprehensive understanding of appraisals in the real estate industry, consider the guidelines provided by the Real Estate Authority.

Understanding the Pest and Building Inspection Process

Next is the inspection process, which is usually obtaining a pest inspection, and structural building inspection as a minimum. 

This isn’t required by mortgage lenders, but it’s highly recommended as it assesses the property’s structure and systems, revealing any potential issues that could cost you in the future. 

During an inspection, a qualified inspector evaluates various aspects of the home, which could impact your decision to purchase or negotiate the price. 

Finalising your home purchase is an exciting time, but also surprising for some, especially when we break down all the fees involved. 

The Necessary Fees

There are fees and charges associated with finalising a mortgage transaction.

There are title searches to be done, registering the title and new mortgage into your name, insurances, registered valuation fees, and more.

When you work with our mortgage broker’s we’ll give you an itemised list of these costs from your chosen lender. Typical costs include:

• Loan Origination Fees: These are charged by the lender for creating the loan.
• Valuation Fees: Paid to the registered valuer for determining the property’s value.
• Title Search and Registration: For verifying the property title via Land Information New Zealand.
• Low Equity Margin Fees: A fee the lender charges you if you have less than a 20% deposit. This is also known as a low equity premium. This is usually added on as an increased percentage on top of your interest rate.

Reviewing and Signing Mortgage Documents

The final step is reviewing and signing the documents that transfer ownership and establish your loan.

Ensure that you read each document carefully; these will include the loan agreement, which outlines the terms and conditions of your mortgage, and the settlement statement, which summarises the additional costs to finalize your mortgage. Look out for the following documents:

• Loan Agreement: Details the terms of your mortgage.
• Settlement Statement: Lists all settlement costs you’re responsible for.

Ask questions and request clarification on anything unclear to you before you sign. If you need more information on the process and the documents involved, talk to our mortgage specialists, we are happy to help. 

After you’ve successfully acquired your mortgage, it’s now time to manage it effectively. Your financial stability and property ownership depend on it.

Make Regular Payments

To maintain your home loan, you must make regular repayments. These are typically due monthly, but paying weekly can save you thousands of dollars over the term of your loan. 

Setting up an automatic payment from your bank account can ensure you never miss a due date.

Coping with Interest Rate Changes

Interest rates can fluctuate, impacting your repayment amounts. Stay informed about the current interest rates as they can either increase or decrease your monthly payments. 

If rates drop and you continue to pay the same amount, you’ll pay off your loan quicker. However, if they rise, be prepared to pay more. Talk to our advisers about fixed rate loans, which can help with budgeting during the fixed rate period.

Refinancing Options

If your financial situation changes, talk to us about refinancing options. Refinancing your mortgage can potentially save you money or help you pay it off faster. It’s all about ensuring you have the most suitable mortgage structure for your needs.

These FAQs will help clarify some of the most common concerns you might have.

How much do I need to earn to get a mortgage?

The amount you need to earn to secure a mortgage can vary depending on the lender’s criteria, the loan amount, and other financial commitments. Lenders assess your ability to repay the loan based on your income, debts, and expenses.

How long does it take to get a mortgage approved?

The timeframe for mortgage approval can range from several days to a few weeks. This will depend on the completeness and complexity of your application and documentation, and the lender’s processing times.

Can you get a mortgage on your own?

Yes, you can get a mortgage on your own provided you have a stable income, a good credit history, and the necessary deposit. Lenders will evaluate your situation to ensure you can manage the loan repayments independently.

Can you get a mortgage with no deposit?

Getting a mortgage with no or low deposit can be challenging. Most New Zealand lenders require at least a 5-20% deposit. Some special programs or guarantor loans may allow you to borrow without a deposit. Talk to our specialist mortgage brokers about your individual needs. 

Buying your first home in New Zealand involves several key steps: preparing your financial documents, understanding the importance of property valuations and inspections, choosing the right mortgage broker (that’s us), and accurately completing the application form. 

Each of these stages plays a role in not just obtaining a mortgage, but ensuring you find a loan that fits your financial situation and goals. 

Remember, the path to homeownership is a journey that requires careful planning, research, and attention to detail. With the right preparation and guidance from the team at OneStop Financial Solutions, you can navigate the process smoothly and move closer to owning your dream home.