Financial discipline will get you there 95%

Financial discipline-Suresh Sharma.jpgWith declining housing prices and continuing low interest rates, first homebuyers are becoming more active in the market as compared to property investors.

Banks’ general requirement of 20% deposit disqualifies many of them.

We get every other day buyers with 5% to 15% deposit. Most of them do not fit into the lending criteria of major banks.

But we have been able to help them, arranging 95% loan from one of the prime lenders at standard interest rates and some low equity premium payable upfront, which can be added into the loan amount.

This lender does not require very high income but want its borrowers demonstrate total financial discipline.

Some of the major requirements for up to 95% home loans are 5% saved deposit, not gifted or borrowed, no returning/dishonours in account for last three months, permanent residents/citizens, stable job history and clean credit check.

Those purchasing investment property can also avail the 95% loan facility.

You can also use it to consolidate your short-term debts like high interest rate personal loans and credit card balances into low interest rate home loans, if your home has equity available.

If you are interested in more information, let me know.

Interest Rates fall

Interest rates are moving again. Interestingly, this time, medium term and long-term mortgage rates came down.

Over the past fortnight, major banks have dropped their five-year interest rates by up to 0.65%, three-year rates by up to 0.45% and two-year rates by up to 0.30%.

This move indicates the interest rate curve flattening substantially and provides far more appeal to the two and three-year rate options, which are now between 1% and 1.25% higher than the low variable rate.

These changes and the expectations that the Official Cash Rate (OCR) may continue to rise sooner or later suggest fixing some part of your loan over two to three years, if you want some certainty in your repayment amounts.

The two and three-year rate options are now about 1% -1.25% higher than current variable rates of the banks.

Housing Market slides

House sales in Auckland slumped last month as winter set in amid declining demand in the property market. Number of sales fell by 16% to 665 in June compared to the previous month, and by 23% compared to the corresponding period in 2009.

The value of residential sections continued to fall and have gone down by 17% from their peak two years ago. Moreover, migration continues to slow, with the job situation and wage level in Australia attracting New Zealanders.

Suresh Sharma is Director of Cherry Mortgage Solutions based in Auckland. His personal disclosure statement is available on request.

Disclaimer: The above article should be taken only as a guideline and not as personal advice. Mr Sharma and the management and staff of Indian Newslink absolve themselves of all responsibilities or liabilities in this connection. He can be contacted on 021-827575. Email: cherrymortgage@xtra.co.nz

Website: www.cherrymortgage.co.nz

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