RICKY WILSON / Stuff
Glen McLeod says you may need to complain to your adviser first.
Glen McLeod is director of Edge Mortgages. It will answer readers’ questions about home loans, whether you’re a newbie just entering the market or someone who already has a loan and is wondering how best to handle it. If you have a question, email [email protected]
Q: Can you please advise what a young family can do if a mortgage broker has given bad advice?
This couple asked a broker (who was told they were entitled to cash in their KiwiSaver) to arrange a loan to buy a section and make a down payment on building a house. The broker arranged the loan with a bank and the couple made a down payment on the installment with part of that loan.
They then asked to cash out their KiwiSaver fund so they could start building, but were told that because they owned (or partially owned) a section, they were ineligible to cash out their KiwiSaver. What can they do?
* Why banks insist homebuyers save themselves at least 5% of their deposits
* Here’s what you need to know about using KiwiSaver to buy a home
* ‘Illogical’ KiwiSaver rule keeps first-time home buyers out of real estate market
A: The situation in which the couple finds itself is extremely sad. This is not the first time I have heard incorrect advice given by an advisor or lender in relation to the withdrawal of the KiwiSaver first home.
When a person is going to purchase property using a KiwiSaver, the first rule is that KiwiSaver funds must be used to purchase the property. As a Mortgage Advisor working with KiwiSaver for first home withdrawal, part of the information required to complete and apply would be confirmation of ability to withdraw KiwiSaver. The couple should ask their KiwiSaver provider for this.
Then, one would need to complete a KiwiSaver withdrawal form and discuss with their attorney the process required for Kāinga Ora withdrawal. In order to obtain a KiwiSaver cashout and a HomeStart grant, an application must be submitted with the assistance of an attorney and include a sale and purchase agreement. This is standard practice and the only way to request a withdrawal.
David Boyle offers tips for getting started.
Once the withdrawal confirmation is officially received, it would be used as part of the mortgage application. KiwiSaver and HomeStart grant funds must be used as part of the down payment for the purchase of the land.
Depending on the value of the KiwiSaver, in order to purchase the section, an additional cash deposit may be required to obtain the loan for the purchase of the section. Any other deposits the client may have would be used for the construction portion of the loan. Indeed, the request for this type of loan is split into two stages: the land purchase loan and the construction loan.
It appears from the description of the transaction that the advisor did not follow the proper process. I think the couple’s attorney should be involved in the conversation regarding the process that was undertaken and when they were informed that the KiwiSaver removal was necessary. Did the lawyer know he was needed when the section was going to be purchased?
At this point, it looks like you need to file a complaint about the advice you received from the advisor. A complaint must be made in writing and first given to the advisor. The advisor has 40 business days to respond and attempt to remedy it. At this stage, if no solution is found, you must contact the adviser’s dispute resolution system.
Information about the dispute resolution system should be found on the advisor’s website under its disclosure information. You can also search the register of financial service providers using the advisor’s name to find the system provider.
Your complaint will then be heard by the dispute screening service provider, which is similar to the banking mediator. Depending on the process undertaken by the lawyer, you may also need to speak with the bar.
Regarding the current situation of the couple, I would be interested to look into their situation and see if there is another way we can complete this transaction for them.
It would be interesting to determine if there is enough equity involved in their transaction. It may be that a fresh look at the transaction can be helpful. Building a new home is an activity exempt from Reserve Bank loan-to-value restrictions, and therefore we may be able to find a supplier who can help with construction when the loan-to-value ratio is above 80%.