nz shares or property

[dobby41]

That's not entirely true. As I said before, the primary indicator is how you're going to pay it back. In the case of a mortgage ; they're so critical to the house you're buying that quite often they won't accept any building inspection report. Some banks require their own vetted building inspectors but the overall critical factor is the house "must be INSURABLE".

Now take the same funds and buy shares? Show me where brokerage accounts in NZ are insured? Are the share investments insured? Nope - even cash in NZ banks have no depository insurance like the US & Canada have.

Anotherwords, all the equity you have means nothing to the bank if you have no income. Even pension income is not factored in because they look at your age. I'll have to say age is a bigger importance than the equity itself.

Which bit is not entirely true?
That they don't really care what you do with the money?
That they want to know how you will pay the mortgage back (wages etc)?
That they want to know that if you don't pay it back they have sufficient security over a suitable house?

Maybe my post wasn't clear - by adequate security I was meaning a house (one suitable to the bank (insurable etc)).

[SBQ]

@dobby41:

The question lies in what the borrowed funds will be used for. I know 1st hand of a friend (on pension) that has been mortgage free for some time but the bank would not lend him a mortgage on a larger place, despite having the equity of a fully paid home. Their reason was clear; 1) no reliable source of income & 2) his age. While banks aren't really allowed to discriminate by age, the prior is the key reason for rejection of mortgages.

Take the case for house & land package builds where the banks make payment under 'progress payments' to the builder. Changes to the housing plans / variations are red flags as they need 100% clarity what the extra funds (or where the funds go?) will be allocated to in the building process. In this scenario, no bank is going to give 100% of the funds and let the person project manage & choose how they spend it without formal disclosure and contracts.

On a slightly different issue, i'm not at all impressed that almost all the banks in NZ (except Kiwi Bank) are foreign owned. That is, the profits they make are to the benefit of the shareholders abroad. I'm not saying there should be laws to discourage foreign ownership but I do think NZ is way behind in terms of shifting from non-productive 'real estate assets' to investing in more liquid assets like shares in business all over the world. However, our tax laws discriminate dearly with preferential (or lack of tax) on real estate vs more productive assets like equities.

[artemis]

..... Last company I recall that turned off the lights to the NZX? That was Xero and they had clear legitimate reasons for moving to the ASX. Meanwhile, the NZ Xero share holder (or managed fund) went from a tax free position of owning Xero shares when they were on the NZX, to a position where their Xero shares (or any foreign company) listed abroad would be subjected to FIF.

Xero is a NZ resident company.

[Bjauck]

...
Last company I recall that turned off the lights to the NZX? That was Xero and they had clear legitimate reasons for moving to the ASX. Meanwhile, the NZ Xero share holder (or managed fund) went from a tax free position of owning Xero shares when they were on the NZX, to a position where their Xero shares (or any foreign company) listed abroad would be subjected to FIF.

Back in the day, when NZ had a "brain drain" and there was more emigration than immigration, there was a joke than the last person to leave NZ should turn off the lights...Seems incredible today after so much population growth due to migration.


MET recently had its light on the NZX extinguished. I don't know with XRO, but many Australian listed companies are exempt from FIF rules..

[dobby41]

@dobby41:

The question lies in what the borrowed funds will be used for. I know 1st hand of a friend (on pension) that has been mortgage free for some time but the bank would not lend him a mortgage on a larger place, despite having the equity of a fully paid home. Their reason was clear; 1) no reliable source of income & 2) his age. While banks aren't really allowed to discriminate by age, the prior is the key reason for rejection of mortgages.

So the mortgage wasn't rejected because of what they wanted to USE the money for but rather their ability to pay it back.
So you have proven my point!

[dobby41]

On a slightly different issue, i'm not at all impressed that almost all the banks in NZ (except Kiwi Bank) are foreign owned. That is, the profits they make are to the benefit of the shareholders abroad. I'm not saying there should be laws to discourage foreign ownership but I do think NZ is way behind in terms of shifting from non-productive 'real estate assets' to investing in more liquid assets like shares in business all over the world. However, our tax laws discriminate dearly with preferential (or lack of tax) on real estate vs more productive assets like equities.

Maybe you can clarify something for me - how are equities productive?
Buying initial shares in a new venture is productive but after that the company doesn't get a cut from the trading so how do they add to the company?
Sure, if they make another equity raise it helps to have a high share price but that doesn't happen a lot.

A rental property could be considered productive - they produce a lot of ongoing economic activity from property management to repairs and maintenance.

[iceman]

A theoretical question.
I presume banks will not agree using equity in your home to invest in shares? or am I mistaken? But if I went to ANZ or Westpac and indicated that the money would be used to buy their Shares (WBC or ANZ) what would the response be? They could hardly say sorry buying shares in your bank is too risky??

You are mistaken. I have just done exactly that with ANZ. No problems as long as your LVR and repayment ability is in order.

[Sgt Pepper]

You are mistaken. I have just done exactly that with ANZ. No problems as long as your LVR and repayment ability is in order.

thanks ICEMAN. tempting

[iceman]

thanks ICEMAN. tempting

Just to be clear. I didn't say anything about where I was going to invest it. Just a loan for "investments opportunities". No questions asked.

[fungus pudding]

Just to be clear. I didn't say anything about where I was going to invest it. Just a loan for "investments opportunities". No questions asked.

I didn't have a mortgage on my house until bank told me they had a special offer. If I took minimum of $150,000 or more (revolving credit) there would be no fees, so I took it. No discussion about where I would use it, std home rates. Problem is I can't be bothered using it. Those days are gone.