A professional mortgage broker should not only help you work out how much you can borrow, but they should also adopt a strategic outlook so you can make wise, informed decisions and prevent costly mistakes.

In this week’s blog, we look at one case study to show how crucial it is to engage a professional mortgage broker when you buy a property. For a stress-free buying journey, the right mortgage broker can give you their ongoing support through the loan application process, right through to property valuation and successful settlement. 

The client faced the risk of not settling on his off-the-plan apartment, how did we help him?

Video Timeline:

1. Because his property was valued at less than the purchase price, Client A was at risk of not successfully settling on his off-the-plan apartment: 00:55

2. With Prosperity’s help, the client successfully settled his apartment in two weeks. 02:28

1. Because his property was valued at less than the purchase price, Client A was at risk of not successfully settling on his off-the-plan apartment.

One year ago, client A bought an off-the-plan apartment in Auckland, at the purchase price of $520k.

One year later, the developer confirmed to the client that construction on his new build would be completed in two weeks, which meant it was time for the client to arrange a property valuation.

As his mortgage broker, Prosperity Finance ordered a property valuation through his bank’s panel, as per our usual process.

However, when the valuation came back, our client’s new apartment was valued at $510,000- $10k lower than his purchase price one year earlier. 

The client applied for a loan with a 15% deposit based on his property valuation, which was less than the bank’s preferred percentage of at least 30% for an investment property. So, this was a high LVR (loan-to-value ratio) loan. 

Although many of New Zealand’s major banks have strict requirements on loans for off-the-plan apartments, Prosperity Finance succeeded in helped the client get his 85% high LVR loan approved with BNZ. In this instance, the client reached BNZ’s limits on the percentage they could lend. As a result, the client would need to pay a further $8,500 within two weeks.

If the worse-case scenario eventuated, and the client wasn’t able to pay the additional $8,500 within two weeks, he could have potentially lost his property settlement and would have to pay a further 15% as a penalty.

2. With Prosperity’s help, the client successfully settled his apartment in two weeks.

Prosperity Finance figured out a good plan to help our client. We discovered that, in order to satisfy the bank’s conditions, he needed to investigate alternative units in the same apartment block. 

What if he could find another apartment in the same building that meets the following criteria, then it would be the turning point for the client:

• Had the same floor plan as his property; 
• Had a final property valuation no less than the buyer’s purchase price; and
• the buyer’s purchase price would be no less than $520k?  

After getting more information from his developer, he found an apartment that matched the criteria we set for him. 

Then, we checked that the valuer was a BNZ accredited valuer. This was a crucial check because the bank would only accept a property valuation report done by a BNZ accredited valuer. 

The valuer did a new valuation for the client’s property, and his new valuation report showed that this apartment was worth $520k.

We submitted the client’s new valuation report to BNZ and they accepted it. 

Finally, the client successfully settled on his apartment.

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.

Prosperity Finance - here to help

A house is a significant financial commitment and is often the biggest purchase of our lives. That’s why it’s important to get the process done right the first time, and so costly to get it wrong. As professional mortgage brokers, we’re here to guide you through each step of the process - from planning, getting a home loan pre-approval, house hunting and your big settlement day. Give us a call today on 09 930 8999.

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