TYPES OF MORTGAGES

There are many different types of mortgages available.

Here are a few of the different types available in New Zealand.

Table Loan

• Initially, your payments are mostly interest, but as you pay off more interest they become mostly principal.

• By the end of your loan term you will have completely paid off your loan.

THIS IS THE MOST COMMON KIND FOR RESIDENTIAL PROPERTY,
SUCH AS YOUR OWN HOME.

Interest Only Loan

• This means the repayment amount is far lower than a loan that includes principal repayments.

• However, he amount of your loan doesn’t reduce over time.

• After many years of making payments, you will still owe the lender the same amount of money you originally borrowed.

THIS TYPE OF LOAN IS OFTEN USED BY PROPERTY INVESTORS.

Reducing Balance Loan

• You pay off more of your principal with each payment, so as your balance drops, your interest costs drop too.

• Thus your payment amount should reduce over time.

THIS CAN BE A GOOD CHOICE IF YOU KNOW YOUR INCOME IS GOING TO REDUCE DURING THE TERM OF THE LOAN.

For example, if you are retiring in the next few years.

Tailored Loan

• You would pay a little more than the minimum required payment each month (or fortnight).

• Then, on the anniversary of your loan each year, the payment amount is increased.

THE RESULT IS YOU PAY YOUR HOME FINANCE OFF MUCH FASTER, POTENTIALLY SAVING YOU INTEREST.

Home Construction Loan

• At the start of the construction process you are advanced a part lump sum. This gets the process started with the purchase of the land, building permits, deposit to the builder or architect etc.

• As the build progresses you request Progress Payments. These are paid to you by the Lender at predetermined stages throughout the build. For example, when the foundation is laid, when the roof goes on, when the exterior cladding goes on etc.

• You may be asked to provide evidence of progress at some stages. This is usually done by using a Registered Valuer to give a Progress Valuation addressed to the lender.

• Once the build is completed and the Code of Compliance issued, you would request the final amount of mortgage to pay the last invoices from the builder and any sub-contractors.

• Throughout the building process the loan is on floating interest rates. When all payments have been made, you may choose to fix the mortgage interest rate.

THE TYPE OF LOAN YOU ULTIMATELY END UP WITH MAY BE ONE OF THE ABOVE TYPES OF LOAN, BUT WHEN BUILDING IT WILL START OUT AS A FLOATING INTEREST CONSTRUCTION LOAN.

If you are having trouble getting mortgage finance
for your property purchase or project, we may be able to help.

Simply complete our Enquiry Form (no obligation enquiry) for our Specialist Lender, who creates property finance opportunities that would often be constrained by Banks and other Financial Institutions.

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