How to get loans, credit ratings, and mortgages are common questions for expats relocating to New Zealand. Then there’s the added complication that most newcomers aren’t eligible to buy their own homes until they receive residency. So we’ve asked Financial Advisor Neville Modlin, who moved to NZ himself from South Africa 17 years ago, to share his personal learnings and advice on financial planning for expats.
Can you tell us about your own personal financial journey as a migrant to New Zealand?
Our journey is not a very common one. Back in 2006, I arrived two months prior to the family, found work and applied for a work permit to allow residence. Once employed, I applied for permanent residence which was achieved within 6 months.
Financially, we lived on our combined business income from South Africa, and my Kiwi salary.
We did not have the luxury of capital on arrival. So apart from the essential expenditure on renting a home, we kept expenses low and paid cash for both vehicles which cost under $5,000.
I learned one personal financial lesson the hard way, making the mistake of buying / starting a new business without speaking to the experts, thinking I had the knowledge necessary to be a success. Then along came the Global Financial Crisis. More importantly I was further disadvantaged by not having “local” knowledge. The overall outcome was that purchasing a house was delayed by years.
What financial planning issues do you typically see with new migrants and expats when they arrive in NZ
Typically we see new migrants 2 – 3 years after arriving with a sense of regret in their eyes, “if only we knew…”
With expats, their lifestyle and business mindset is often still in the economy of their home country. And unfortunately, this is generally way off the way things operate in New Zealand.
As a result, little to no financial planning is the main issue we see.
For new migrants, expensive vehicles are usually the first purchase, followed by the boat – generally purchased with cash or persuaded into borrowing by finance companies, some of which target new migrants.
Asset finance is one of the only loans non-residents can obtain along with a personal loan.
Expats who do arrive with some capital often don’t take adequate time to understand how different the New Zealand market is, especially relating to property.
An Auckland 4 bed home might easily be double the cost of a similar home, say in Perth.
The sale proceeds of a home in South Africa for example, would only cover the deposit for an Auckland home.
Newcomers often worry about how to establish a credit rating in NZ, what's your view on that?
This is a very common misconception.
Your New Zealand credit report does absolutely need to be clear. For new migrants, however, not having a “file” will not negatively affect the decision.
What is vitally important is how the person has conducted their bank accounts since being in New Zealand. The following issues are taken into consideration:
Are there regular savings?
Does the customer go into unauthorised overdraft often?
Do they spend every last cent after payday?
When applying for a home loan, not having any credit red flags or “limits” will ensure you are getting the maximum mortgage for the home under the responsible lending code.
Having credit “limits” whether unused or paid 100% on time, will reduce their lending capacity. For example, any credit card, store card or Afterpay type facility will reduce your lending capacity. It’s important to note the limit of the facilities is important, not the balance. Eg. a credit card with a $20k limit reduces your potential lending by $100,000.
How can people start preparing to buy a home when they don't have residency yet?
Education should be your first step. Start a conversation and relationship with the bank direct or a registered financial adviser. That way you’ll learn about what lenders need from you, and they’ll have a chance to get to know you too.
Here are some the key things you’ll need to understand
Terminology (what words mean in the application and/or loan agreement)
Process and the role of the bank / broker
Process and role of the solicitor
Process and role of the estate agents
Ways to purchase a home eg auction, by negotiation and more
Rates and options around loan structures
Effects of having debt, even if only “limits”
Types of construction and how this affects lending eg weatherboard & plaster
Costs relating to buying eg registered valuation, builders report
Going through the process early educates newcomers to New Zealand well in advance of actually applying to borrow. Then when the time arrives, you’ll be comfortable making a quick and informed decision.
Many new migrants wait until they gain residency to start the conversation. Then they get frustrated with the process as it’s not at all what they expected, creating unnecessary stress and sometimes delaying the process if they don’t have all the necessary information and understanding.
What is the one piece of financial advice you'd give to a newly arrived expat or migrant?
My key advice is to decide what your priority is, or will be. If it’s a home, don’t spend your capital or enter into lending agreements (where possible). Once you have your home, new cars and long holidays will come.
Anything else you'd like to add?
Based on personal experience I know it can be overwhelming in your first few months of arriving. So, relax and settle into your new country.
At the same time, do devote some time to starting conversations with experts in the industry early – ask questions, plan and set your goals. You’ll be subject to plenty of ‘water cooler advice’ from workmates and friends, but it’s a good idea to seek objective input from experts.
Finally, can you tell us briefly about The Lending Team and what you do for clients?
The Lending Team was established to help individuals & businesses navigate the roadmap of financial lending. We have the experience of being "the customer" and fully appreciate the stress and uncertainty around finance. Our role is to investigate a lending solution that suits your current situation in accordance with current market regulation, which at present is frequently changing. We then engage directly with the Lender on your behalf, to get the best mortgage detail for your circumstances. Best of all, in most cases our services are paid for by the banks.
For more information about financial planning: www.thelendingteam.co.nz
Mobile Relocation delivers resettlement and relocation programmes for businesses employing offshore talent. Our goal is to get your expat and migrant talent up and running in NZ as quickly as possible - reducing their time to effectiveness in their new role, and enabling them to deliver their skills and expertise to your the benefit of your business.
Bridget is a New Zealander who has lived and worked as a diplomat in Singapore and India. After experiencing all facets of the relocation experience, she founded Mobile to work with private individuals moving to NZ and leading local and international businesses bringing in offshore talent. bridget@mobile-relocation.com
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