Today our clients settle on their new home, purchased using a shared home ownership with YouOwn.
The shared home ownership with YouOwn enabled them to buy a home that was suitable for them and their family. You see, they have four children and are purchasing in Hamilton. They spoke to their own bank and then a local mortgage broker and were told the maximum they could get approved for was going to allow them to buy for $700,000.
Yes, they had spoken to their bank and to another mortgage broker, and the maximum they could get approved for was not enough to buy a suitable house. They had ‘almost’ resigned themselves to the fact that they would need to stay renting and then reached out to Mortgage Managers who they had heard were very good at helping when others couldn’t.
Why Was Their Lending Restricted?
It was restricted for three reasons:
Firstly, their account conduct. They had had a default lodged on their credit check four years ago. When we dug into it, it was due to a payment not made for a childcare center. However, it was disputed that this was ever owed, as the childcare center had changed hands, and it appeared that the previous owners had not reconciled fully. The new owners of the childcare center acknowledged that there was no money owing, and therefore the debt showed as being resolved. However, it still showed, and therefore was a blemish on their conduct.
They also were restricted by their deposit. They earned too much to be eligible under the Kainga Ora First Home Loan scheme, and therefore a lot of the low deposit options were not available for them. The other mortgage broker that looked at the deal for them said they required 10% deposit, and therefore they were restricted to a purchase price of $700,000.
There was also a student loan, which affected how much they could borrow, as the repayments on the loan were quite sizable given the wife’s income. She had gone back to university to extend her training, which is a good thing as she’s earning a good income now. But with student loans, the payments are based on that income, and so the repayments are quite significant, which restricts how much could be used towards the new mortgage repayment.
These are all quite common type of things that we see with first home buyers – and we deal with a lot of them!
How Shared Home Ownership Helped
With the shared home ownership with YouOwn that allowed us to consolidate the student loan, and therefore to free up extra cash to go towards the mortgage repayments.
The non-bank lender also was not so concerned about the default and offered them a pretty good interest rate too. With shared home ownership, the deposit was not an issue as they only needed 5%, and they had over that once they paid the student loan off as well.
Shared Home Ownership with YouOwn – Let’s look at the numbers:
The purchase price was $875,000 and funded as follows:
| Your Deposit | $80,000 |
| Basecorp Finance | $700,000 |
| YouOwn (including the Student Loan) | $95,000 |
| $875,000 |
Basecorp Finance
This is the mortgage and is for $700,000 + fees as noted.
The interest rate is a floating rate of 6.45%
Repayments are $1,035 weekly
Note: the aim is to refinance this portion to SBS Bank but needs to be after 12-months.
YouOwn (shared ownership)
They have agreed to fund $95,000 which represents 11% of the purchase price.
Note: You need to be aware that you then have the option of buying that share (11%) at the market value in 5-years, and therefore should the value be ‘say’ $1,000,000 then the 11% share would be worth $110,000 to buy.
Repayments are $135 weekly
Of course buying with shared home ownership withYouOwn will normally be more expensive than renting, but it’s their home now. Once they refinance to SBS Bank the repayments could drop or what they should do is keep paying the same and pay off the mortgage faster.
Who Can You Speak With?
Of course many first home buyers still speak with their own bank; however that is very restrictive and means you will often never end up with any choice – effectively limiting your options. People that understand this will often speak to a mortgage broker (adviser), but often they have limited options too.
If you really want a professional adviser that can offer you all the choices then speak to one of the team at Mortgage Managers. It was Mortgage Managers that set up the Kiwi First Home Buyers website here and Facebook Group and so probably deal with more first home buyers than any other mortgage advisers in New Zealand.
This also means they are treated well by banks and other non-bank lenders, and so with shared home ownership with YouOwn they are able to use both non-bank lenders and a bank too. Most advisers that work with YouOwn do not have the option of using a bank and that restricts what they can offer.
