Month: November 2017

Sneaky Mortgage Broking Tricks: How Mortgage Brokers Can Pull A Fast One On You

Mortgage brokers in 2017 are a far cry from those around during the financial crisis in 2008/2009. The New Zealand cowboy mortgage brokers were in a large part responsible will the housing crash, as they had been enthusiastically arranging mortgages for amateur investors without really paying any attention to the risks and the inability the borrowers to make payments.

Dani Caperton, a Kiwi mortgage broker, treats her clients with the utmost care and respect

Back then, great Northland mortgage brokers were happy to exaggerate their clients ability to make payments, and exaggerating their clients net worth and even the value of their property portfolio, all to ensure that the client would get their mortgage and the broker would get their commission. It all came horribly unstuck in 2008 and 2009 when suddenly the housing market crashed and stressed investors were unable to sell their properties or make the mortgage payments. Mortgagee sales and bankruptcies and the inevitable personal toll was wide spread.

Now in 2017 every mortgage broker needs to be fully qualified and registered, and will have had to pass a difficult financial examination as well as get approval for registration and become party to an approved dispute resolution scheme. Mortgage brokers can no longer get away with the same tricks that they did in 2008/9, but for all that the best mortgage brokers in Hawke’s Bay are still able to help customers meet their goals.

Banking legislation has made it more difficult for borrowers to get a mortgage by insisting on a 20% deposit. A mortgage broker can help the borrower by advising ways that the borrower can meet the 20% deposit from KiwiSaver and other sources, and the broker can also help by making certain that the borrower is presented to the bank in the best possible light.

Mortgage brokers also have access to non Bank lenders who may be comfortable with lending to a client who is not acceptable to a normal bank, but they would require a higher interest rate. Mortgage brokers can even tap into high net worth individuals who are comfortable lending to clients at even higher interest rates. Often clients are happy to borrow this money if it is for the short term while they are waiting for a property to sell for example.

A number of mortgage brokers specialise in these difficult cases, and they get no one in the industry s street smart and the go-to person if you have a difficult problem. These brokers are generally in the larger centres, but they are happy to take work from anywhere in New Zealand. Often these brokers are responsible for saving investors and borrowers from financial ruin by coming up with a clever plan then strategy specific to their client.

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Residential Land Developments

The residential land developer is a special breed of business person. They will purchase a block of land, generally farmland on the outskirts of a town or a city, and then hold on to that land sometimes for many years waiting for council regulations to change the zoning so they can build on the land. They may also then wait for market conditions to deliver the best possible sales price, at which point if they have been able to hang on for all this time they should be in a position to make a very large profit.

Sarah Chan, independent mortgage broker

This practice of course causes problems in the New Zealand housing market, because the houses are being built at the time of the developer’s choosing and not when they are actually required, hence putting pressure on existing houses and driving up prices.

And experienced residential land developer will probably have sufficient cash reserves to enable them to purchase the land and sit on it for many years, but the newer residential land developer will probably have to raise a mortgage for this, and will probably not be in a position to hold onto the land for a very long time before actually developing it into a residential subdivision.

The developer will need very good mortgage brokers in the Rotorua area to arrange for the finance for this stage the process, and the finance will generally be fairly short term and could be fairly expensive because of the risks associated with the project at this stage. The developer won’t bind us if they are able to capitalise the interest payments will cover them in any way, as these costs will be substantially less then the potential profit on the project.

While the developer is holding onto the land they will also be carrying out all the planning and consenting work, partly because this takes a long time and I will need to get things happening fairly quickly, and partly because the further along the project gets in the easier it is for the developer to pre-sell some or all of the sections. This can be a cash windfall that can be used to offset the land purchase and other expenses.

Once all the appropriate planning and consenting is complete then the developer will want to start on the actual development, and a different set of financing will be required from the mortgage brokers who are based in Taupo. This generally will be much shorter term finance, and also will be flexible, so that the lending can be reduced as sections are sold and paid for as deposits or even the final price.

The further along a land development proceeds into the subdivision the more attractive the sections will look to buyers, and the developer will be able to command a higher price and a higher deposit as the project proceeds. At some point the developer will have sold enough sections so that all of their costs are covered, including the previous and the upcoming costs, and from this point on every section they sell is share profit. The mortgage terms will have meant that they can pay down the mortgage and then attack the process of making good money.

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The New Zealand Mortgage Broking Market

Mortgage broking in New Zealand is somewhat unique because the country is so small, and a small number of large broking companies have ended up dominating the market to a massive extent that would be difficult in a much larger country.

Susan McDermot, mortgage broker

These large broking firms worked out a few years ago that there would be a steady trend towards Internet search for customers needing the best mortgage brokers Nelson has to offer, and that there would be in this case very clear winners and losers. They took what was then a courageous step and committed a large amount of capital development to building a classy website and developing the SEO necessary to ensure that they came up as much as possible in the number 1 or number 2 slot for Google searches.

The strategy can be high risk, because if you do not get in the number 1 or number 2 slot you will be winning only a small fraction of the new business that you were otherwise win, and for many companies that have attempted this their investment is largely wasted.

The companies that have succeeded in ranking themselves in the top 3 pretty much have a lock on that spot and therefore a lock on over 60% of all the new business coming up through the Internet. While is very effective for them it is not necessarily good for the average customer, because as in any industry the dominant player does not need to give exceptional service if that is not the key to them winning business.

In the mortgage broking sector this is particularly the case, as the dominant players have become lazy and arrogant, to the point that they will use administrative staff to pre-screen callers to eliminate all but the straightforward customers. Even in a property downturn such as is happening in late 2017 these companies are still receiving so much work on a daily basis that they can afford to reject all but the most simple and straightforward clients.

Needless to say this is not efficient economically, and is therefore liable to disruption. This is indeed the case in New Zealand, where a small startup company with exceptional SEO expertise is executing a business model that will make certain that they are ranking their own website in the top three for major search terms. They have a model that passes any leads that are generated directly to a compliant mortgage broker within the Northland region who is of the old school and is able to handle any complex problem that is throwing his way.

They are in the early stages of executing this business model, but the long term outlook is impressive. They may not make a dramatic impact on the large companies, but the impact on their own company and their compliant broker will be very significant in a very positive way.

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Mortgage Brokers in the Rural Sector

City people do not generally appreciate us, but there is an active property market in the rural sector, both for residential properties, lifestyle blocks and farms. The number of annual transactions is a vastly lower than in the cities, but there is nevertheless an active market, with sellers, buyers, real estate agents, banks and mortgage brokers.

Llana Thompson has been a mortgage broker for twelve years

While it generally costs the same or even more to build the equivalent house in a rural setting rather than a city, house prices right across the rural sector are generally significantly lower than in the big cities. The obvious exception is the lifestyle blocks around the perimeter of the big cities, but the lower prices are particularly obvious in the regions.

The much lower volume of property transactions in the rural townships means generally there is house buyers need good services such as mortgage brokers Marlborough then they a better to go to the nearest large Centre or even deal remotely with a mortgage broker and one of the large cities. An expert mortgage broker is an expert because they get a lot of practice and they get to deal with many different situations and problems, and mortgage broker in a small Centre generally can not get anything like this type of experience.

The best way for home buyers in the small rural towns to find a mortgage broker there’s something to search on Google, although the way that Google displays mortgage brokers means that house flies or generally feel like they only have a small handful to choose from at the top of the list. If they feel comfortable dealing with a very large mortgage broking company then they should go that way, but they should be aware that they may not be given the best possible service, as these companies highly profitable and achieve this by simply making certain that they only choose viable customers and they process them as quickly as possible. House buyers and probably better advised to approach an independent mortgage broker in a large Centre, as these are much more focused on providing good service that results in referrals and repeat business the other track.

Independent mortgage brokers Nelson generally cover a lot bigger variety of situation then do brokers that much larger companies who are generally really working in a sausage production Factory. The independent broker is much more likely to find a solution for a marginal client then is the large broking company, because in reality for the independent broker finding a solution is what their business depends on. The actual man hours required to process a mortgage from start to completion is generally only a few hours, but the commission paid out can be $3,000 or more, so independent broker does not need many clients in a month to make a healthy income.

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