Where The Money Comes From

Press, Volume XCVII, Issue 28529, 7 March 1958, Page 12

Where The Money Comes From

Chief among Government sources of finance for home building is the State Advances Corporation, which now makes loans at two rates of interest. The corporation’s normal lending margin is two-thirds of the approved valuation, with a limit of £2500. Under the "special loan system” advances o. up to 90 per cent, of approved valuation or cost are considered, within a maximum loan range of £2OOO to £2400, according to family size. The interest rate on these loans is 43 per cent. Other State lending institutions which make finance available for home-building are the Public Trust Office and the Government Life Insurance Office. Private lending institutions include life insurance offices and building societies. They grant two types of loan. One is up to two-thirds—in some cases more—of the approved value of the house and section with no fixed limit. The other is a loan of up to 90 per cent, of valuation, with a maximum of £2200. New Loan The new loan is at the rate of 3 per cent. Eligibility for the new loan is confined to cases where the income of the wage earner in the 12 months immediately before the lodging of the application did not exceed £lOOO. The maximum allowable income will, however, be increased by £5O for each dependent child. In assessing the income of the wage-earner, overtime, bonuses and all other income—whether earned or unearned—is included. Loans are considered in this scheme on the basis of the applicant making the greatest contribution within his means. Applicants for housing loans

must satisfy lending institutions that the -.proposals they submit are within their financial means. The applicant’s income must adequately cover mortgage repayments, rates, insurances and maintenance of the home. The applicant must also have saved sufficient capital to meet the contribution required towards the cost of building. Most loans. are required to be paid by instalments over periods of up to 30 years. Lending institutions will, when there are exceptional circumstances, grant loans for longer periods. For young persons who do not need a home immediately, but are planning for the future, the Post Office Savings Bank has a house lay-by account scheme. These accounts earn special bonuses above the normal savings bank interest rate. Group Building Group building has been introduced by the state as an alternative to the normal methods of arranging for a builder to build a house on a section which has already Jaeen purchased. Under this scheme, builders in many New Zealand cities and towns are constructing reasonablypriced houses for sale to the public. The standard of construction is checked by the State Advances Corporation and the suitability of houses for loan finance is assured under this scheme. Purchasers of group-built houses are thus doubly safeguarded. The houses are built on Crown sites in many cases, so that the initial outlay may be reduced by exercising the option of a renewable leasehold title or of purchasing the section on a deferred payment licence.