3 Myths about buying a house in Auckland

by Aug 22, 2016First Home Buyers, Non-Bank Lending, Property investment

Auckland House Buying Myths

Auckland’s property market has been the focus of lots of media attention over the past year. And rightly so; it is newsworthy for a city to increase its property prices by 52% in 3 years. However, along with the factual news, three myths about buying a house in Auckland have been repeated. Today, we debunk those myths.

Myth # 1 – Banks decide who gets to enter the Auckland property market

This is simply false. Banks are only the first tier of a two-tier lending system. The main difference between first-tier lenders (Banks) and second-tier lenders (non Banks) are the restrictions placed on them. Even if the Bank recognises the value in lending you money to buy a home, they are often restricted by the financial regulations placed on them. So if you find yourself rejected by a Bank, you should realise that you can still get a home loan and enter the property market.

Second-tier lenders can still provide you with a home loan when Banks cannot. If you are looking to enter the booming real estate market, you’re not beholden to the Banks. By setting up your home loan with a second-tier lender, you can gain entry into the Auckland property market. Second-tier lenders don’t require the same deposit as Banks do, making it much faster for you to gain entry and take advantage of the rising prices. Also their pricing maybe a lot less than you might think and you have the same legal security as you would with a Bank.

For example, iLender can provide you high loan-to-value mortgages. This means that you can get a larger loan for a lower amount of equity. You don’t have to wait years before entering the property market when you use a high loan-to-value mortgage. These high loan-to-value loans have become increasingly popular amongst your Kiwi first home buyers, as banks have accepted only 20% deposits in Auckland, and 15% elsewhere.  Our products go to 90% Countrywide.

Myth # 2 – Auckland is completely unaffordable to average buyers

As the average house price in Auckland has reached $942,760, many market speculators have declared that the market is unaffordable to average kiwi buyers and first home buyers. While the market is more expensive than 12 months ago, it is not unaffordable.

Firstly, $942,760 is only the average – there are many houses in Auckland much cheaper.

Secondly, there are many mortgage tools available that allow buyers to purchase more expensive homes – even if they can only afford a lower home loan. High loan-to-value mortgages, like those from iLender discussed above, allow buyers afford more expensive homes than the Banks tell them they can afford. Borrowers can also offset their monthly costs by having a boarder or flat mate.

Myth # 3 – The Auckland housing market is set to crash

The national manager of Century 21, Geoff Barnett, said, “Some commentators are now trying to compare the real estate market to the sharemarket excitement leading up to 1987. It’s completely different. Auckland house prices aren’t rising off the back of speculators having a bit of fun. They are continuing to rise largely because there’s a shortage of supply.”

Sound economic principles have pushed up Auckland’s housing prices, not speculation. And that is why you can trust that the housing market isn’t going to crash. While the housing prices increased significantly, so did the region’s growth – which increases housing demand in Auckland. In the past year, the region grew by 43,000 people and is forecasted to grow by a further 400,000 over the coming 17 years – indicating strong rising demand for almost two decades to come.

About iLender

At iLender we put your best interests first and not the Bank – our advice is unbiased as all Lenders who we do business with pay about the same in commissions.

Although we are Auckland based Mortgage Brokers, we help customers everywhere in New Zealand and overseas with buying property in New Zealand, as we are very much about online and giving advice here and now!

Options for when your ‘Interest Only’ term expires

In an increasing interest rate environment, coming off a low interest rate PLUS coming to the end of an ‘Interest Only’ term, can be financially traumatic! Be proactive and explore your options. With a Mortgage of $500,000 on an interest rate of 2.99%, if you refix at...

When a Bank can’t help, where can I get a Home Loan at Bank rates?

Good question! We are asked this a lot, so here's our guide to 'close to, but not a Bank, lending'. The first thing we ask is why? What is it about the application that makes the Bank say No? There are multiple reasons and here are the top five. "I'm self employed and...

4 Tiers of Non-Bank Lending: What You Need to Know

It’s currently a struggle for every New Zealander: trying to get the bank to approve their home loan. Lending restrictions are tighter than ever, even for New Zealanders with a perfect credit history.  Luckily, non-bank lenders offer an alternative approach that...

The New Zealand housing market: Is now a good time to buy?

The New Zealand housing market has experienced some major ups and downs in recent months due to some interesting regulatory changes as well as wider global economic conditions.    House prices across the country have started to fall while interest rates have...

Best mortgage rates, 10% deposit owner occupied and 20% rental purchase, self employed with no financials and help for those with bad credit or arrears.

Hundreds of reviews on TradeMe and Google makes us your ‘Number 1’ choice.

Call 0800 536 337