The money supply for property investing is getting tighter. It is becoming harder to obtain finance because policy is changing in an effort to protect New Zealand’s banking system. So now is a good time to think about where your money supply comes from and where you will source it in the future, especially if things take a turn for the worse.If the market changes, e.g. interest rates go up, how will you meet your current obligations? Could you still make the interest payments on your investment properties? Will you be able to continue to grow your portfolio?
Now consider where else you could get money from. It’s important to get these alternative sources in place now while things are good, because if you wait until you really need them, they may not be options any more.
- Overdrafts and Lines of Credit (LOC) – get these set up now and keep using them. For instance, put your salary into your LOC every month and pay your credit card bills out of it. By storing the spare cash you have available in your LOC, it reduces your interest cost. If you set up your LOC now but don’t use it, the bank may take it away when you really need it.
- Use more than one bank – if your current bank wants to shut your LOC down, you can move it to the other bank. Because you already have business with them, they may be more inclined to provide you with finance.
- Credit cards – try to get maximum credit card facilities in place and apply for them now. Try not to use them, and always pay your credit cards off in full by the due date.
- Talk to a good mortgage broker – they are experts at hunting for finance deals.
- Get your budget sorted – can you make your weekly earnings stretch further so you can top up interest payments or service more debt if necessary?
- Talk to friends and family – could they help with a loan to get you through a rough patch?
Dealing with bankers
The changing bank policies are already causing some people to get frustrated with their bankers if they are refused finance. Don’t take your frustration out on the bankers! This will only make matters worse. They are just following bank policy so being stroppy won’t help you. It’s important to protect your relationship and not shoot from the hip because you may not have another bank to go to due to the strict LVR and RBNZ rules. Be nice, and the bank will be more inclined to help. If you are rude and angry they are more likely to pull your funding.
In this changing banking environment you would be wise to analyse your current sources of money and figure out where else your supply could come from. Now could be an excellent time to talk to a good mortgage broker who is experienced in investment property and get your alternative sources set up. For an introduction to our resident mortgage broker, who I’ve always used and highly recommend, please fill out the form below.