Top Tips to Secure Your Home Loan and Purchase a House

Understanding Home Loans for Auckland Business Owners

If you're a business owner in Auckland thinking about purchasing a house, you're probably juggling more than most buyers. Between running your business and managing your personal finances, finding the right home loan can feel overwhelming. The good news? Understanding the basics of residential mortgages and knowing your options can make the whole process much more manageable.

Whether you're looking at your first home loan or you're an upgrader loan candidate moving to a larger property, the fundamentals remain the same. You'll need to understand how much you can borrow, what deposit you'll need, and which type of home mortgage suits your situation.

How Much Can I Borrow?

Your borrowing capacity depends on several factors, and being a business owner adds a unique dimension to this calculation. Banks and lenders like ANZ, ASB, BNZ, Westpac, and Kiwibank will look at:

• Your business income and profitability (typically requiring two years of financial statements)
• Your personal income and existing debts
• The property's value and your proposed deposit
• Your credit history and financial stability

A home loan calculator or borrowing calculator can give you a rough idea, but working with a mortgage adviser who understands business owner lending is invaluable. They can help you present your financials in the most favourable light and know which lenders are more accommodating to self-employed applicants.

Deposit Requirements and LVR Explained

The loan to value ratio (LVR) is a crucial factor in your home loan application. It's the percentage of the property's value you're borrowing. Here's how it typically breaks down:

• 80% LVR: You have a 20% deposit, which is the sweet spot for avoiding extra fees
• 90% LVR: You have a 10% deposit and will likely pay a Low Equity Premium (LEP)
• 95% LVR: You have a 5% deposit, which comes with a higher low equity margin (LEM)

The deposit requirement you can meet significantly impacts your home finance options. If you can manage a 20% deposit, you'll avoid LEP charges and access better mortgage rates. However, if you're working with a lower deposit, don't be discouraged - many business owners successfully secure low deposit home loans with 5% deposit or 10% deposit options.

Fixed Rate vs Floating Rate Mortgages

One of the biggest decisions you'll make is choosing between fixed rate and floating rate mortgage options. Each has its place in a sound home loan strategy:

Fixed Rate Mortgages

With a fixed rate, your interest rate stays locked for a set period. Common terms include:

• 1 year fixed
• 2 year fixed
• 3 year fixed
• 5 year fixed

Fixed rates give you certainty with your repayments, which can be helpful for budgeting alongside your business expenses. You'll know exactly what you're paying regardless of market changes.

Floating Rate Mortgages

A floating rate mortgage moves with the market. While there's less certainty, you gain flexibility. You can typically make unlimited extra repayments and lump sum payments without penalty, which is ideal if your business generates irregular income or bonuses.

Many mortgage brokers recommend a split loan or combination loan approach, where you fix part of your home mortgage and keep part floating. This gives you both stability and flexibility.

Principal and Interest vs Interest Only Loans

For most owner occupied home loans, a principal and interest loan (also called a table loan) is the standard option. Your repayments cover both the loan amount and the interest, gradually reducing your debt.

However, some business owners consider an interest only loan for their property loan, especially if they're also managing business debt. With interest only, your repayments are lower in the short term, but you're not reducing the principal. This can work temporarily, but isn't sustainable long-term for your home.

Home Loan Features That Matter

When comparing current rates and carded rates from different lenders, don't just focus on the interest rate. These home loan features can make a real difference:

Offset Mortgage: Your savings account balance offsets your loan, reducing the interest you pay while keeping your money accessible.

Revolving Credit: Works like a giant overdraft secured against your home. You can draw down and pay off as needed, paying interest only on what you use.

Redraw Facility: Make extra repayments and withdraw them later if needed - helpful when business cashflow is unpredictable.

These features can turn your house loan into a more flexible financial tool that works with your business cycles.

Working with a Mortgage Broker

As a business owner, your income situation is more complex than salary and wage earners. A mortgage adviser who specialises in home loans for self-employed clients can:

• Present your application to lenders in the most favourable way
• Access special rates that might not be advertised as carded rates
• Compare options across multiple banks and lenders
• Handle the paperwork while you focus on your business
• Explain the differences between competitive rates from different institutions

Whether you're considering refinancing down the track or taking out your first mortgage, having an expert in your corner makes a real difference.

Making Your Move

Purchasing a house as a business owner in Auckland doesn't need to be complicated. Understanding your borrowing capacity, knowing your deposit options, choosing the right mix of fixed and floating rates, and selecting appropriate home loan features will set you up for success.

Remember, a repayment calculator can show you what you'll pay, but a conversation with a knowledgeable mortgage broker will show you what's actually possible for your specific situation. They can help you avoid LEP charges where possible, find the most suitable loan structure, and potentially save thousands in interest over the life of your home mortgage.

Whether you're after an NZ home loan for your first property or looking to upgrade to something larger, the right mortgage lending solution is out there. Call one of our team or book an appointment at a time that works for you, and let's talk about your home loan options.