FHBs need to know the alternatives, and brokers can help
Many first-time home buyers (FHBs) – and builders – are losing out on property ownership because they don’t know the alternatives, says peer-to-peer lender Southern Cross Partners.
According to Southern Cross Partners, young Kiwi families who wish to take advantage of the loan-to-value ratios (LVRs) with low deposit for new builds – many with pre-approvals from their bank – are having their hopes dashed when they realise the bank will only finance the completed home, and most builders won’t build without finance.
“It’s a rock and hard place,” say Southern Cross Partners chief executive officer Luke Jackson. “The banks want a finished house, but the builder needs money to actually build the project.”
“Bear in mind that 80% of New Zealand’s home builders are small businesses,” Jackson continues. “They can’t often afford to buy the land and finance the build themselves, and to do so ties up too much capital.”
Jackson says that as a result, second-tier funders like Southern Cross Partners are seeing strong growth in their ‘bridging finance’ product, but FHBs need to know that there are alternatives.
“Builders can approach mortgage brokers, and we are currently doing a lot work with the likes of NewBuild, for example, and ask them to find construction finance that allows them to buy the land and build the house,” says Jackson. “When it comes time for the new owner to take ownership, their bank’s pre-approval kicks in and Southern Cross Partners is repaid.”
Too many FHBs aren’t doing their research, but mortgage brokers can always provide them with all the other options.
Southern Cross Partners utilises a network of mortgage advisers who help people that don’t fit typical bank lending criteria, even when they have good equity to back their loans.
