Navigating NZ's Mortgage Market: Key Differences for UK Expats
If you're thinking of buying a home in NZ, there are many differences in dealing with the banks compared to the UK that you should know about
Credit History:
UK: A robust credit history is crucial, often built through credit cards or previous loans.
NZ: Here, you're considered "innocent until proven guilty." No need for a long credit history; banks are generally content with recent payslips, like three, if you're new to NZ.
Documentation:
UK: Prepare for a lot of paperwork, often covering many years.
NZ: Less paperwork, if you have 3 payslips and 3 months of bank statements, you may not need too much more.
Cash Contributions vs. Implementation Fees:
UK: You might face an implementation or arrangement fee for setting up your mortgage.
NZ: Instead, you're often given a cash contribution from the bank, typically around 0.8% of your loan amount. Keep in mind, this isn't out of kindness; NZ banks operate with higher margins, so you're essentially paying for that cash with the interest rates you are charged.
Negotiation Culture:
UK: Rates and terms might not be as negotiable.
NZ: Banks are often open to negotiation on rates or cash, and sometimes they are not.
Refinancing Habits:
UK: Switching banks for better mortgage deals happens but it isn't as common.
NZ: Quite a lot of our clients choose to refinance every 3-4 years to catch another cash contribution. If you don’t do it you are subsidising others who are prepared to refinance. There is also option of asking for retention cash every 3-4 years but this is typically lower at around 0.2%, and sometimes there is no retention cash offer.
Legal Checks:
UK: The legal process for buying property can be quite complex, involving numerous checks and solicitors. There's also a risk of "gazumping," where another buyer could outbid you after you've agreed on a price but before contracts are exchanged.
NZ: The legal process here is generally simpler, reducing the risk of a deal falling apart once you've gone unconditional. However, for expats, there's an important caveat: banks will often require a lawyer to confirm at the end of the loan application process that you are legally permitted to own property in NZ. This can be a potential snag if not addressed early. At Windsor Wealth, we have clients work with a specialist lawyer up front who will sign you off at the start of the process, to avoid major stress at the end.
Why Use a Broker?
When you deal directly with a bank, remember, the banker you're talking to is there to represent the bank's interests, aiming to maximize their profit from you. A mortgage broker, on the other hand, represents you, not the bank, and yet the bank pays for their service. If this seems too good to be true, consider this: some banks have tried cutting out brokers to save money, but this strategy backfired as the percentage of people using brokers has only increased over time. In fact, current statistics show that close to 50% of mortgage deals in NZ are facilitated through brokers.
No Direct Cost: Unlike in the UK, where you might have to pay for broker services, in NZ, there's no fee to you; brokers are compensated through bank commissions.
Multiple Offers: A broker gives you the advantage of seeing offers from various banks.
Long-term Guidance: Brokers specialising in expats, like Windsor Wealth, provide ongoing advice on mortgage strategy year after year, potentially saving you more over time than any rate negotiation could.
These differences highlight how buying property in NZ can be quite different from the UK. Understanding these can ease your transition into the Kiwi property market. While NZ banks might seem more generous, it's all part of their business model. Using a mortgage broker can simplify the process, offer tailored advice, and provide long-term support, all without any upfront cost to you. If you're an expat looking to make NZ your home, starting with a broker might just be your smartest move.