Mortgage money

Press, 4 September 1980, Page 12

Mortgage money

In Residence

Bronwen Jones

If you are planning to buy or build your dream house, first establish a savings record with a lending institution. Today we look at housing finance the Canterbury Savings Bank, the ■ Bank of New Zealand, and the National Bank offer their customers.

A current account with the bank you are applying to for a loan is very important. Both the Canterbury Savings Bank and the Bank of New Zealand will consider only existing cus--1; tomers, and although the .? National Bank claims to • occasionally consider • people who do not have accounts, it is unusual that they are granted a housing loan. As well as being an existing customer, an applicant

. must have a “banking history.’’ This means, he or she must have had some . money in the bank for some time. Trying to ascertain “how much for how long’’ was hard going in the case of : the B.N.Z. The district manager of advances in ■ ' ‘Christchurch, Mr Alan McKee! told me that the bank did not want to publicise these criteria because it wanted to maintain maximum flexibility when con- ' sidering mortgage applic--1 ations. ... The National Bank prefers applicants to have ■been banking there at least 12 months. For the C. 5.8.,, an average balance of SSOO over three years is used as a very rough guide. All three banks are reasonably flexible. What the banks generally seem to want is a savings record - that shows a customer has been able to save roughly the , same amount each'month as he or she would be paying out on tire size of the mortgage desired. : , But being a good customer with the ability to repay does not guarantee a loan. The supply of available funds and the demand for these are important factors as well. For example, the B.N.Z. has made an extra sl3 million available for housing finance, but this fact was announced and so the number of applicants, that is, competitors for the finance, has significantly increased.

Applicants are interviewed by branch managers or loan executives who assess them to see if they are “spenders and perhaps overcommitting themselves, or the conservative types who do what they say they are going to do.” “There is nothing worse than to help people into financial trouble,” says the bank.

The C.S.B. is currently lending to all those who meet its savings criteria.

Applications for C.S.B. home loans are made through your solicitor after an initial interview by the bank, to see if you qualify. Applications for B.N.Z. and National Bank loans are made directly through the banks. All three banks have the property you want to buy valued, and lend between one-third and threequartefs of its valuation. You must meet the balance of the price with , a deposit, and a second . mortgage where necessary. . The C.S.B. and National Bank take about two weeks to process applications; the B.N.Z. can take less than one week after the property has been inspected. Answers to B.N.Z. applicants are given each Friday, and the deadline for submissions is Wednesday afternoons. If the loan is, refused, the branch, man-, ager or loan executive .cari - ' resubmit your application.: But he is unlikely, to unless he feels some important point has been left out.. .

Who makes the decisions? In the case of the C. 5.8., the decisions are made by the management and ratified (that is, rubber stamped) by the board of trustees. National Bank applications are sent to the. bank’s head office in Wellington, but those that get through the local branch managers’ screening processes are seldom refused.

The decision on B.N.Z.’s Canterbury and Westland applicants is made ultimately by Mr McKee. However, at least some loan executives in the bank’s Cathedral Square building tell applicants that the decisions are made in Wellington. The C.S.B. charges 13 per cent interest on first mortgages up to $25,000, and 14 per cent on any amount more than $25,000. The rate sounds high, but because the amount of interest paid is reduced every three months as more of- the loan is paid off, the total amount of principal and interest paid back on a 30-year, $24,000 loan is $70,410.! This is compared with $69,770 for a 9 per cent Housing Corporation loan of the same amount for' .the ’, same length of time.' ’ ’

The National Bank usually , charges .11.75 per cent and prefers to lend for 10 to 12 years; but will stretch to 15 years. The B.N.Z. charges 11.5 per cent interest and has a flexible pay-back period. Although their interest rate is higher, C.S.B, loans are cheaper than National and B.N.Z. loans. For example, on a 15-year, $24,000 loan the over-all amount of interest and principal paid back on a C.S.B. loan will be $47,790, while on a B.N.Z. loan it will be $50,918, and $50,976 on a National loan. (If the interest rate goes up during the 15-year term, the total amount to be paid will also increase!)

All three banks claim to lend to solo parents and people living in de facto relationships. The banks do not make “moral” distinctions, they say. But at least one applicant has been told by a B.N.Z. loan that the bank does not lend to people in de facto relationships “because of the transitoriness of the relationship.”