Provide info when seeking a mortgage

When it comes to loans for rental properties, banks are not the bad guys, according to Westpac Rotorua manager Tracey Mold.

"We are trying to protect you - we don't want your purchase to turn into a mortgagee sale any more than you do."

Mold said all four of New Zealand's major banks were lending at the moment and a lot of deals were out there for those looking to invest in property - as owner occupiers or as landlords. These included 95 per cent mortgages for first home buyers intending to live at the property.

But she stressed it was important to give your lender as much information as you could to ensure you were getting the most appropriate and affordable deal.

"Investment works differently for everybody. When you come in to see us, know what you want out of a loan.

"Come to us with a plan. We want to know you and know what you are doing. Talk to us about you, as people, and we will work it out."

Mold recommends seeing your bank early in the house-hunting process as many will offer pre-approval up to a given amount.

"We offer six months' pre-approval based on salary or income and rental income. That means you know how much you have to spend."

Lenders would calculate this based on a set level of occupancy for the rental property. She said this was for the protection of the investor - ensuring they would be able to cover payments should there be breaks in the tenancy.

When deciding how much they can afford to borrow, investors also need to remember that interest rates may be low at the moment but will rise at some point during the life of the mortgage.

"Nobody really knows for sure [what will happen with interest rates], but if you fix for the long-term, then you are aware of what your outgoings will be, without the worry of what's around the corner."

If you are planning to sell the property on in a few years, fixing may not be such a good option as you need to take breakage fees, etc into account.

But while the bank will want to know about your personal finances to assess how much to lend, Mold recommends keeping your personal and business finances separate.

"Keep your rentals separate from your personal accounts so you can see exactly how much it is costing you."

When everything was coming and going from the same account, she said, it could be easy to lose track of whether the investment was making money or you were topping it up from your own salary.

Because most owner/occupier property sales had a Friday settlement, to allow the new homeowners to move in at the weekend, she suggested investors consider arranging settlements for earlier in the week to take the pressure off banks and lawyers and allow the new owner time to do things to move tenants in at the weekend.

The Rotorua Chamber of Commerce hosted a property investment seminar at the Distinction Hotel on March 28. This is the fifth in a series of Saturday articles based on presentations at the seminar.