Why Bank Financing is Not a Good Idea When Buying an Apartment

Summary:

Are you planning to buy an apartment and would like to use your bank to get finance? Is bank financing the best option for you? This podcast will reveal the disadvantages of  using banks, and why it's better to choose a broker when you want to buy a property in Auckland.

TRANSCRIPTION:

Good day, Andrew Murray from Apartment Specialists talking to you about Auckland apartment sales, and specifically today: should you use your bank to get finance for an Auckland apartment?  The question is an absolute big, no. You think, Okay, you’ve got a long relationship with the bank; you can go to your bank and get finance.

Unless you've got a lot of money, which means you have a lot of capital and you've got a lot of assets so you're a high value customer, I strongly recommended you don’t. Now the reason why - I actually experienced this when I was first buying my first couple of apartments. As you're generally dealing with someone lower down and you're dealing with a general clerk at the bottom and they have to follow the set rules, they can't go outside the box; they can't go outside the square.

What banks do is they set the criteria from a very high value to cover most situations. So, when you go to your bank and ask for finance they may say, No. I have seen so many situations where, for example, you've had two buyers who go to the same bank, one's gone through a broker or one has a larger net worth and the bank has funded it, compared to another purchaser who went straight to the bank at a lower level and couldn’t get financed.

Now this is the same property in the same bank and that person who missed out, in the last three years probably lost about $50,000 to $60,000. So, it's actually really, really serious. What I would advise is to go through a broker. A broker has relationships at very high levels and they want to get paid by chasing that deal. They want to get commission, so they will do everything they can to get that deal through for you.

So, I'd highly recommend going through a broker because if you look at it, every single bank is just what criteria, but I've seen stuff get pushed through by brokers that doesn’t meet their criteria. The only bank that doesn’t is BNZ. BNZ does have a policy. But what we do is we have people in touch high up in BNZ who can help out. I highly recommend, if you are going through for finance for an apartment, always go through a broker. They have the relationships that have been formed over five, ten, 15 years and they will make the finance a lot easier in all respects.

I hope that helps, always go through a broker. Talk soon, cheers guys!