KiwiSaver additional consideration for home-loans

Media Release: 09 July 2007

KiwiSaver an additional consideration for home-loans

Mike Pero Mortgages is advising people with existing home-loans to talk to a mortgage broker about KiwiSaver before committing to join the scheme.

Chief Executive Officer Jeff Staniland says “people may not have thought about the effect their KiwiSaver contributions could have on their home-loan. A contribution of 4 percent may not seem like much but it is $167 a month for someone on $50,000 a year and for someone who elects for the 8 percent rate it is more than $300 a month.”

He says “that could have an effect on a home-loan application or refinancing application if someone’s finances are reasonably tight, particularly in the recent high-interest rate environment.”

Mike Pero Mortgages has been talking to the various lenders it deals with on how they will treat KiwiSaver contributions in relation to home-loan applications. Some lenders look at gross income and say they will probably treat KiwiSaver contributions as an expense while others look at net income after the KiwiSaver contribution.

Jeff Staniland says “for people looking to refinance existing loans KiwiSaver could have an effect on how they are treated. We are advising people to come and talk to a mortgage broker well before they need to refinance.”

He says “a lot of people will need to refinance their home-loans over the coming months as they come off fixed-term rates and may be facing a significant hike in interest rates.

“There are of course a variety of options our brokers can suggest. The effect of KiwiSaver contributions, however, will be to lower the amount that can be committed to home-loan repayments.”

For someone with a $200,000 mortgage fixed at 7 percent (say two years ago) for a 15-year term and seeking to refix for another two years at 9.25 percent, monthly payments would go from $1764 to $2026, an increase of $262 a month.

ENDS

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