Non Bank low deposit home loans could be the answer
Do you need low deposit finance but feel as if your options with traditional Banks have run out? Have the new deposit restrictions and the rapidly increasing cost of housing made it all seem impossible?
Many of our clients have dealt with Banks and Brokers and are sick of being told NO!
Even if you fall outside of Bank qualification guidelines we can still look at ways to help you with a low deposit Non Bank home loan, giving you easy-to-understand advice and help through the process.
We make it our business to know what loans will work for you, and which Non Bank lenders can give the right low deposit home loans. Many Mortgage Brokers have little or no experience with the two options below:
An option that is coming back into fashion with the current legislation is a product that helped our clients into homes many years ago, with just a 10% deposit, when the first low deposit restrictions were introduced, we called this the “80/10 Split”
The 80/10 allowed many first home buyers to purchase at 90% using an 80% first mortgage and a 10% second mortgage. The first mortgage was often interest only to allow the second mortgage to be paid off quickly, as this may be on a 5 – 7 year term. Many clients we then helped refinance the second mortgage into a new home loan after say 12 – 24 months.
How does this work?
You wish to buy a new home costing $800,000, you have 10% deposit, $80,000, such as Savings, KiwiSaver, Gifts.
So we arrange a home loan at 80% over 30 years of $640,000 then a second mortgage of 10%, $80,000, plus we allow a buffer of say 1% of purchase price for lender fee, legal costs and broker fees, so second mortgage is say $88,000
To assist clients, refinance back to a Bank after 12 -24 months, with lower rates we always recommend:
- Add value to your home by refreshing interior exterior or garden
- Pay down debt as fast as possible and avoid new borrowing on car loans, HP, credit cards
- Buy in an area where capital gain would add value to your home
Another exciting option that we have now been approved to offer, to help you own your own home, is a shared ownership or co-ownership proposal. This can work with your deposit being as low as 5%. The target areas for this product are broadly Pokeno to Taupo, including Hamilton, Tauranga and Rotorua being the larger provincial centres. Are you looking to buy in these locations, click here to apply. Later this year, indications are that more centres in New Zealand will be added, including Auckland.
How does this work?
With co ownership you partner with a business that provides equity up to 15% of your home. As there is a monthly charge for this of 4.95%pa, it is still best to contribute as much as you can. This is a long term commitment, but the intention is that after 5 years the goal is to refinance to buy out the equity partner. At this point an updated registered valuation would be required and the capital gain is shared based on your ownership at the outset.
As an example, if the property had increased by $50,000 and your ownership when you purchased was 85%, 85% of the capital gain, $42,500, is yours and 15%, $7,500, the equity partners. So, the equity partner would need to be paid out their initial contribution plus $7,500. If it sounds complicated, don’t worry, it took us a little while to understand, but we have more information available, plus you can talk with the business partner. Click here if you want to talk more about co ownership.
For all Low Deposit Home Loans it is important that you can clearly show regular income from employment or your business, have minimal amounts owing on credit cards / car loans etc and any credit issues should be minimal.
If you would like to know more about how Non Bank home loans can get you on the property ladder, and whether you can apply for a low deposit home loan, then contact one of the team today, as they will be open minded and understanding.