A mortgage “not yet” shouldn’t mean “good luck, come back later”

I’ve been spending quite a bit of time talking to mortgage brokers and mortgage advisers in New Zealand recently.

And there’s a really obvious opportunity sitting between what they do and what we do at Money Sweetspot.

Mortgage brokers regularly meet people who want to buy a home, have a decent income and are doing lots of things right, but they’ve got consumer debt sitting in the way of a mortgage.

A car loan. A credit card. A couple of things bought when life looked different. Sometimes debt accumulated through a separation, a period on one income, or just because life happened.

The answer can effectively become: “Go away, sort out the debt, then come back.”

Which is technically a plan in the same way that “get fitter” is a training programme.

Whilst it's an answer, it’ isn't a particularly useful one!

Why mortgage brokers care about helping clients reduce debt

The mortgage broker wants that person to buy a house too as their commission opportunity is generally the mortgage, not sending someone to Money Sweetspot for a Financial Reset. In the usual mortgage-advice model, that commission is paid by the bank or lender rather than being another cost added to the customer.

So the broker has a pretty good reason to help someone get from:

‍“I want to buy a house”

to:

“I’m actually in a position to apply for one.”

Money Sweetspot can potentially help with the bit in between.

Debt consolidation shouldn’t just be debt in a nicer outfit

Mortgage brokers work with thousands of people and we don't want every client that wants debt consolidation!

I can hear you saying as you read this "Surely as a lender you want to lend money?

That's where I believe that product fit matters to us more than any other lender.

Our Financial Reset is designed for people who genuinely want to get out of consumer debt because there is something they want to get on with afterwards.

For a lot of people, that “something” is home ownership and consumer debt has an annoying habit of hanging around long after the thing you bought with it has stopped being exciting.

So, it makes sense that if someone has good affordability and we can reduce the cost of their debt, we don't particularly want to give them a five-year loan just because the weekly repayment looks nice and small.

We want them to clear it properly and move on as quickly as possible!

Again, I hear you saying "Don't you want to keep your customers as long as possible?"

We really don't- that's why we tak about being 'Out of Debt and On with Life." That's why we talk about product fit being so important to us because if we refinance a credit card or other revolving facility, it gets closed. And we check. And our cusomters need to be OK with that- as we care deeply about their commitment to be out of debt.

Afterall, we’re not paying off your credit card so it can sit there, freshly rejuvenated and ready for another adventure. That’s not a reset, it's just debt with a costume change.

With us, our customers can also earn rewards for learning more about money and making progress, because getting out of debt takes real work.

Rather than our customers aspiiring to be really excellent at having a consolidation loan we want them to stop needing one.

Debt consolidation for first-home buyers

This is probably the most obvious use case. A mortgage broker meets someone who looks like a future first-home buyer, but their consumer debt is affecting mortgage servicing, their ability to save, or their overall financial position.

Instead of losing them into the ether for two years, the broker can refer them to Money Sweetspot.

We assess whether a Financial Reset is actually suitable. If it is, we consolidate eligible debt, close the refinanced facilities and help the customer work through it.

The broker keeps the relationship and when the customer is in a stronger financial position, they can return to the person who already understands their home ownership goal.

There are no promises that they'll suddenly qualify for a mortgage as banks, quite reasonably, still want the maths to maths, but tidying up debt is definitely part of that picture.

We've also learnt that sometimes peope expect a Financial Reset to be a magical mortgage wand. Sadly, we haven't built that feature yet, but there’s a world of difference between:

“Come back when you've sorted your debt.”

and:

“Here is a pathway to work on the thing that is holding you back, and I'll still be here when you're ready.”

Helping people in rent-to-buy and progressive home ownership

First-home buyers aren’t the only people who can benefit. We've spent a some time working around rent-to-buy, shared ownership and progressive home ownership programmes in New Zealand.

People in these programmes can be incredibly motivated and they know what they're working towards, but consumer debt can still slow down their progress.

A Financial Reset can help them tomove more quickly through a rent-to-buy programme, build savings, or strengthen their financial position for the next stage of home ownership.

What comes AFTER the debt is the goal, not the debt itself!

Sometimes the goal is keeping the home you already have

This one is more nuanced over the last few years. We see that people have been absolutely fine financially and then life changes.

Sadly, the most common reasons see this year are the impact of job losses, or a longer term reduction in income. The mortgage is still there, plus consumer debt that was perfectly manageable under the old circumstances, but can lead to a sinking feeling in the new circumstances.

A Financial Reset won't be appropriate every time, and sometimes mortgage hardship support, a conversation with the existing lender, financial mentoring or another solution is what someone genuinely needs.

However, if higher-cost consumer debt is making the household position unnecessarily difficult, resetting that debt can potentially give someone some breathing room while they adjust.

For that person, financial progression isn't buying their first home,It's keeping the one they've already worked bloody hard to get.

Why Money Sweetspot is working with mortgage brokers

Mortgage brokers know mortgages and housing and We know consumer debt, lending and financial wellbeing.

By combining those two things, we can provide a better solution for the customer sitting in front of us both.

Not mortgage-ready today can simply mean there are a couple of things to sort out first.

And that is exactly what a Financial Reset is supposed to be.

Out of debt. On with life.

FAQ TLDR

Can debt consolidation help me get a mortgage?
Potentially. Reducing and simplifying consumer debt may improve your financial position, but a Financial Reset does not guarantee mortgage approval. Mortgage lenders will still assess affordability and apply their own lending criteria.

Can Money Sweetspot help first-home buyers?
Money Sweetspot may be able to help where consumer debt is a material barrier to someone’s home ownership goal and a Financial Reset is suitable and affordable.

Can my mortgage broker refer me to Money Sweetspot?
Yes. We are beginning to work with selected mortgage brokers and advisers who can identify customers where consumer debt may be getting in the way of home ownership or another housing goal.

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