How do I apply with Squirrel?
You can apply online now, or you can call us 7 days a week on 0800 21 22 30 and we’ll do everything over the phone or arrange for one of the team to meet with you. We can come and see you or you can come to our office in St Mary’s Bay Auckland.
What is a Preapproval?
A preapproval is essentially a mortgage approval subject to certain conditions being met (usually a valuation.) It puts you under no obligation to the lender.
Given the state of the housing market, and huge variances in credit policy between banks, it pays to get preapproved before you find a home. That way you know how much you can borrow and are in a better position to negotiate. Once you are preapproved we will be in less of a rush once you find the place you want! Apply Now
How fast is the Process?
It pays to get organised in advance. Whilst we can usually turnaround an approval inside 3 days, the banks can be a bit slow from time to time, especially if the mortgage is over 80% of the property’s value. If you are borrowing over 80% allow for 5-7 working days to get an approval. We really like it when you talk to us early in your house buying process!
What paperwork is required?
The first step is completing an application that sets out your assets and debts, and income and expenses. To verify the figures we need to support the application with proof of income (usually a pay slip), proof of a saved deposit, and 3 months of bank statements. In addition the bank and/or Squirrel also run credit checks.
Lending Criteria
In the current market every bank’s lending criteria is different and there are lots of hooks to look out for. We are seeing a number of clients that get quite far through the process to then discover problems with finance. In this market there is absolutely no point dealing with the bank directly because they can only give you one solution.
Can I borrow over 80%?
Yes – but borrowing over 80% has got harder. It is still possible if you have good income and no other debts. Below 80% you can borrow 5x your income. At 90% you can only borrow 4x your income because the lender will require you to pay-off your mortgage faster.
Borrowing over 80% also costs more. That will either be as an upfront fee by the lender (up to 2.5% of the mortgage value) or as a premium added to your mortgage rate. With the upfront fee option, it can be added to your mortgage balance so you do not need to “find the cash” to pay it. If the lender includes a rate premium, this can range from 0.50% to 1.00% above standard mortgage rates.
A registered valuation will be compulsory (cost $500+). You will also need ongoing mortgage protection or income protection insurance. It simply does not make sense to be taking risk at this level of borrowing.
Are you Self Employed or a Contractor?
To borrow over 70% you need to have been doing what you do for two years whether that be contracting or running your own business. If you are a pure Contractor (with negligible expenses) and in an industry that uses contractors (project management, IT, telecoms or film) then the bank will be more flexible, but still usually cap you at 80%-85%.
Guarantors
If you have less than a 20% deposit you can use your family to guarantee that part of the 20% deposit you have not saved. The guarantee is limited to a maximum of 20% so Mum and Dad won’t risk losing everything if you fall over. Read more about mortgage guarantees
Second Mortgages
Essentially we put two mortgages in place. The first is for the first 80% of the property with a small second mortgage for a further 10%. This can be a very cost effective (and flexible) way of borrowing. We still do second mortgage but the market has become a lot tougher. Read more about second mortgages
Vendor Finance
Vendor Finance is where the seller leaves equity in the property (as a second mortgage.) It is a loan and must be paid back. Ideally the vendor finance is charged at a market based interest rate. Vendor Finance is trickier and only really works for people with no deposit but high incomes and no other debts. Read more about vendor finance
From time to time we come across vendor finance deals. If you are interested let us know.
Apartments, Townhouses, Bare Land
The maximum amount that can be borrowed for apartments, townhouses, and Lifestyle Blocks is 80% of the property value. With bare land it varies between 70% and 80% depending on the lender and location. Lifestyle Blocks must be less than 10 hectares.
Building a new House
If you are building a new house this is referred to as a construction loan. Most lenders only go up to 80% on new builds however at Squirrel we have options that go up to 90%. With a new build you should get a fixed price contract ideally with a master or certified builder as their work will be guaranteed.
Before the mortgage is fully approved you will need to get a Registered Valuation and we will agree with the builder and the lender at what stages during the build that progress payments will be made. At each stage the bank may ask for an updated “as is” valuation and we’ll need to stay below the lender’s loan-to-value cap (generally 80%) throughout the build.
Most banks lend against the project cost. Sovereign is a bit different and lets us use an acquisition price that makes allowance for “reserves” and interest capitalisation. This along with some other differences around the build management make Sovereign a good choice for these types of mortgages.
Non Residents
The maximum amount for non-residents is 70% of the property value. If you are working in NZ and do not have permanent residency then your maximum borrowing will be 80%.