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The various fees involved with your NZ home loan
Establishment fees are tiered depending on the amount you borrow the more you borrow, the more profitable you are to banks, and the more the banks will negotiate with you. Generally, if you borrow over $100,000 the bank will waive the establishment fee.
Transactional Banking Fees
Normal Floating and/or Split Loan
This varies from bank to bank. Some banks will rebate some of the monthly fees (for example ASB will rebate $20 per month when your lending is greater that $50,000), other banks, such as NBNZ will have a flat $5/mth fee regardless of transactions.
Revolving Credit Facilities
Most of the retail banks have a flat fee for Revolving Credit facilities. This means you may make as many banking transactions as you like and still pay only the flat fee, typically $10 to $12 per month. Other alternatives that banks offer for revolving credit are to pay a slightly higher interest rate, say 0.20% p.a. and pay no banking fees. This is the strategy we would normally recommend to people that do not require much on revolving credit, for example if you have $20,000 on revolving credit and pay 8.20% p.a. this amounts to $157 per month in principal and interest payments, however an interest rate of 8.00% p.a. only reduces the monthly payment to $154 per month, hence you pay only $3 for all of your banking fees each month.
Solicitor's Fees - Purchasing
Solicitor's fees range from around $650 to $1,500. Due to the wide range it can pay to shop around. If you do not have a solicitor you should ask around for recommendations or we can make a recommendation from the many we currently deal with based on your location.
Lenders Mortgage Insurance (LMI) or Low Equity Fees
This is an insurance premium that you pay the bank if your deposit is under 20% of the purchase price. It protects the bank should the bank have to sell the property for less than the amount the borrower owed at the time of sale.
Some banks choose not to use an insurance company and finance the risk themselves but they will still charge you a 'low equity fee'. Low equity fees and LMI fees are very similar.
Lenders Mortgage Insurance Table
Banks often have re-fixing costs that we would classify as a 'hidden' cost. When your fixed rate comes up for renewal the banks charge a 're-fixing' fee ranging from $0 to $350 depending on the bank you choose. Some banks will waive this cost if you have a higher amount of lending.
Real Estate Agents
Most agents have tiered fees, typically 4% for the first $300,000 and 2% above this amount. Of these fees, around half goes to the agency and half to the agent, however the higher selling agents will receive a greater commission from the agency.
Remember that agents are trying to sell the property for as much as they can possibly get for it, so they're on the seller's side, not yours!
Remember also to negotiate as much as you can. The seller wants to sell to you; we've seen plenty of properties sell for much more than the registered valuation by experienced property investors. Rental property owners that have many properties have done it all before and tend to be better negotiators. We've found that people who miss out on the property they really wanted are back again in a couple of weeks having found a property that they are just as satisfied with if not more so!
Most people get a fairly good idea of property values after looking at quite a few houses, however you may wish to consider getting a registered valuation that will give you a market value. This can put your mind at ease if the valuation is the same or higher than what you have agreed to pay. If it is higher, this gives you plenty of ammunition to renegotiate with the vendor after all, the registered valuation is the 'fair market' valuation and is based upon similar properties in the area.
Valuations are generally required for any loans where the deposit is less than 20% of the property value, however some banks loan a percentage of the actual purchase price so you may not need to organise a valuation. Valuations cost around $400.
Next we will outline the different loan structures and interest rates that will affect your repayments.
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