Getting a flatmate in can be a really a smart financial strategy for a first home buyer.
Not only does it lighten the load of mortgage repayments (woop!), it can also significantly boost your borrowing power, potentially helping you into a bigger and better home than you could otherwise afford (woop woop!).
The problem? In the past, the way most Kiwi lenders looked at flatmate income meant you had to have your new roomie locked in before you’d so much as submitted your mortgage application.
It was all a bit chicken before the egg.
But now, a number of lenders have announced big changes to their rules around flatmates, helping to make the process a whole lot more user-friendly.
Here’s what you need to know.
What’s changed?
Until recently, in order for the banks to accept flatmate income as part of your loan application, you had to provide them with a letter from said flatmate—including their name, address and signature—as proof of their intention to move in.
But last month, several banks (including ANZ, ASB and Westpac) made moves to ease those requirements.
Now, under the new rules, all you have to do is provide a signed “declaration of intent” to say that you’re planning on getting a flatmate in once you’ve secured the property. Easy as that.
The declaration of intent isn’t binding, either. So, should your financial situation improve once you’ve purchased a property (to the point where the extra income is no longer needed), you won’t be forced to stick to it.
It’s important to note that not all banks have made the change—so it’s a good idea to chat with a mortgage adviser to understand your options and how requirements differ from lender to lender.
What do the new rules mean for first home buyers?
In short, they’re good news.
Despite falling interest rates, and house prices being down roughly 20% from peak, affordability still remains a big issue for many buyers.
An extra $200 of flatmate income in the bank each week can increase your borrowing power by up to $150,000—meaning it could be the difference between getting into a home you like vs. a home you love.
If you’re keen to understand more about the new flatmate rules, and whether or not getting a flatmate in could work for your situation, get in touch for a chat with one of our friendly mortgage advisers today.