A client came to us to see if we were able to provide alternatives to the situation she was in with her bank. She had tied everything together with one bank and had circa $3m of lending against 5 properties, including her own home.
This month’s article is a continuation of last month’s on associated persons “traps”. Last month I highlighted two traps that can catch the unwary when moving property between associated entities. This month I have another two traps that readers should be aware of.
This blog is Part 1 of 2 on traps that arise when land transactions involve “associated persons”. By way of background, both the Income Tax Act and the Goods and Services Tax Act have definitions of associated persons and special rules that apply to transactions between associates.
As mortgage advisers we often see clients in situations where they have gotten themselves into debt and aren’t always managing things in the most effective ways, and this includes first-home buyers and also property investors.
It has been another month of rate competition with arguably the largest attention going to Kiwisaver provider Simplicity’s entry into the mortgage industry with a market leading 2.95% rate.
The Tax Working Group’s final report has been issued, and I give a quick assessment of the main points below. However, bear in mind that what the TWG have recommended and what Labour actually implement, are likely to be completely different.
Financing renovations by topping up on your home loan can be the easiest and cheapest way to get the job done if you don’t have access to the cash. ‘Topping up’ means increasing your existing lending with your existing bank.
I wrote about loss ring-fencing in my December article, and it is still a hot topic. With the rules to take effect from 1 April 2019, and the legislation still not finalised, there are a number of questions that remain. I address some of these using case studies, which could well apply to you.
On 5 December 2018, the Government released the first draft of legislation dealing with the proposed ring-fencing of tax losses from rental properties. First impression on reading the Bill is that it is extraordinarily complicated and leaves questions unanswered. Here is a quick summary of the key points.
There is a reasonable chance you have already heard about the phenomenal rates being offered almost across the board now with most banks having rate specials down into the 3%'s.
There is no doubt the Tax Working Group’s recently released interim report is the topic du jour. Accordingly, it is only appropriate that I offer my two cents’ worth, particularly in relation to the comments on a possible capital gains tax.
Can you borrow money to renovate?
The short answer – is yes. There are two key ways of borrowing for renovations (large, or small).
If you’re looking at purchasing your first home, using your KiwiSaver fund is a fantastic way to get a head start toward your deposit.
Buying off the plan can be an exciting proposal, it has many benefits which can be capitalized on if purchasing correctly and with enough due diligence put into practice, however every rose has its thorns, and it is important to be aware of the risks that can be associated to this method of purchasing property.
A bridging loan is a loan to assist you in purchasing a new property before you’ve unconditionally sold your existing property.
New government – New expectations – New rules
I was always taught in relation to saving and investing that it is not the amount that counts, it’s where you put it – it’s allocation.
This is a question that is often asked, so it seems worth covering a few points from different perspectives which may help shine some light on the differences (or opportunities) presented by working with one or the other.
There are imminent changes to the bright-line test which will affect you if you are planning to buy or restructure investment property.
I’ve noticed most people starting this year with a bit of optimism. However, it’s hard to say how much of that is based around fundamentals, and how much is more attributable to the amazing weather we have been having and a decent summer break.
The quick answer is no – not in the general sense where one needs to be saved up
It’s not the relaxing to 70% that some investors had been expecting however the increase from 60% to a 65% threshold will in some cases be the difference in getting another property transaction across the line. That is the big news for investors in the Financial Stability Report which was released earlier this morning.
The new government, their proposed changes to policies, and their effect on landlords/investors, what does it all mean?
Join Matthew Gilligan and Tony Alexander as they give their post-election analysis.
Election time is less than a couple of days away and a lot has changed in the last 6 weeks with it being interesting to see if the ‘personality politics’ that worked so well for National under John Key also work with Jacinda Ardern taking the reigns over a Labour party that until that stage had managed to continue to trip over itself over the best part of the last decade.
Labour has targeted investors in its housing policy released. Ringfencing tax losses, five-year bright line rules and a tax committee (to mask their desire to bring in capital gains tax) are all on their agenda.
Congratulations, you’re approved! What’s next?
Collateral is basically the backing outside of a borrowers personal guarantee which can help a borrower secure loans. It gives the financier the assurance that if the borrower defaults on the loan, the lender can repossess the collateral. For example, car loans are secured by cars, and mortgages are secured by homes.
The Third C, which many Kiwis are facing at the moment as the major hurdle for getting into the property market, particularly into their first home, is Capital.
The next ‘C’ is Capacity. This is a test that the lenders conduct to satisfy themselves that the borrower can repay the loan that is being applied for based on the client’s particular circumstances. It is sometimes referred to as Serviceability too.
Credit is governed by what is known as the 5C’s, I will be doing a five-part blog on each of these over the coming weeks which should assist readers in understanding what it is banks look for when assessing finance applications.
After a fun couple of months with the Lions and American’s Cup taking up much of the countries attention I now expect this to divert to the upcoming election.
Most of you will already be aware that funding is much more difficult than it was only a year ago and this is before proposed additional changes such as Debt – to – Income Ratios and the potential for the RBNZ to increase the capital banks require to hold.
Buying a home is a dream of many Kiwis. It always has been, and always will be – even if it is perceived that it is now more difficult than
ever.
With the fact that this is a large step for anyone, there is no such thing as being too careful.
If you missed our latest Webinar with David Faulkner on "Successfully navigating the challenges of being a Property Investor and Landlord in 2017" click on the below link to watch the recording.
This morning the Reserve Bank has released its latest Financial Stability Report. This is released twice a year and has previously been the platform which the RBNZ has used to announce measures such as some of the previous LVR restrictions.
We at Kris Pedersen Mortgages recognise that the NZ property investment landscape has changed dramatically over the past 12 months.
I was recently asked whether there was an upper limit to the ratio between property price and household income, which in Auckland currently sits at about 10 to 1. In other words, the average property price is worth 10 times the average annual income.
It’s been an interesting start to 2017 with a much tighter credit market than what we have seen for the majority of the last decade. While the majority of the media has been concentrating on the fact that the market seems to have slowed since the 40% deposit rule introduction I put more down to banks themselves pulling back in regards to their willingness to lend and interest rates moving up.
Kris Pedersen talks about whether now is a good time to fix your mortgage and if your loan is already fixed, should you be thinking of breaking the fixed term and refixing at a lower interest rate.
Kris Pedersen gives an overview of the RBNZ's recent submission to the Government to have a new debt to income lending rule applied and he explains how this may effect borrowers in the future.
After both the RBNZ and the Government not implementing any significant property related changes in May in regards to the RBNZ’s Financial Stability Report and the Budget, respectively the RBNZ has this morning put a 40% restriction on the banks in regards to investment lending.
On Friday the 3rd of June ANZ announced a number of changes to their lending criteria.
The key changes for investors to focus on are the removal of the Combined Collateral Exemption and that ANZ will no longer provide mortgages
for construction for investment properties.
We have been commenting on this for a while and it appears that the banks are going to start to pass this on (although a number have not made comment or shown any price changes yet) the Reserve Bank is also conducting a further review to see if the Banks should hold even more capital on mortgage lending which could push interest rates up even further.
The last week has seen policy changes by ASB, ANZ, BNZ and Westpac targeted at offshore borrowers.
Last November the Reserve Bank increased the amount of capital Banks needed to hold when lending on investment properties which we comments on in a previous blog HERE. As per our comments
The market and in particular the Auckland market seems to be back in full swing. After a few months with lower overall sales numbers and auction clearance rates falling the last couple of months the last month or so has seen a complete reversal with Auckland hitting the highest ever median sale price according to REINZ in March and strong sales numbers appearing across the board.
2016 is already looking to be an interesting year in the NZ property markets with some questioning whether the Auckland market has finally peaked and whether it is now set for a major correction.
Following on from the above comments if you are in the Auckland region or surrounding areas and want to know more
This is going to continue to be an interesting but volatile discussion in 2016 with many indicators both at home and overseas suggesting that there could be more downward movement.
With the tightening of Bank rules bought on by the RBNZ changes as well as an increase in borrowers or situations who don’t quite fit into the standard bank space I thought it may be a relevant time to raise a few cases we have funded over the last month with non-bank lenders.
