Refused by the banks, these first buyers borrowed from a friend
Turned down by the banks, these early buyers borrowed from a friend to access the property ladder.
David Thomson and his wife, Eing, borrowed $ 350,000 from a friend at 8.5% – then double the standard rate – to buy a section in Northland and set up a former $ 30,000 railroad cabin there.
He had been turned down for a loan by the big banks. He says he was self-employed and had an income history.
Although he didn’t have a cash deposit, he had a 32-foot Townsend yacht and two classic cars, which he was able to sell for a deposit, if the banks had agreed.
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Thomson, a carpenter, says he and his wife, a seamstress, struggled to pay off the $ 700 a week loan, but they never missed a payment.
With interest rates rising and most of the big banks suspending home loans with low deposit rates, a mortgage is getting harder than easier. ANZ, BNZ and Kiwibank have so far halted most lending to people with deposits below 20%.
As of Nov. 1, a Reserve Bank restriction means banks have only been able to lend 10% of their new loans to homeowners wishing to borrow more than 80% of a home’s value.
Thomson says he and his wife did all of the work on their property themselves, including backfilling the foundation.
“We did it all. I gave Eing a saw and explained how to use it. She cut the first piece of wood and it was perfectly straight. By the time she cut the fourth in a row, I was starting to feel bad about my skills.
He says they call their house the Trade Me house, because of all of its used components, including a kitchen they only paid $ 3,500 for.
“The kitchen belonged to an executive (of an oil company) in a $ 5 million house in St Heliers; it was a custom $ 40,000 kitchen with a $ 7,000 granite bench.
“When they set it up, his wife turned around and said, ‘I don’t like it.’ Eventually, they ordered another kitchen.
Thomson says he and Eing saved up for two years to pay for the insulation: Pink Batts which they bought from a bankrupt company that was selling assets at half price.
They bought used siding bricks from someone who sold the chimney that was removed from a Hamilton property.
“I cut the face of each brick,” says Thomson.
“We did it all. I couldn’t do it again, and I don’t think someone in their right mind – if they knew what they were getting themselves into – would. Even me as a chippy.
“You have to be a glass half full, even when it’s empty.”
The reconstruction project lasted five years.
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“It’s five years of absolute obsession every summer evening, every weekend, vacation, no time off.
“We were coming home from work. Eing would cook dinner. I cooked dinner with a shovel and we both worked until 9:30 p.m., 10:00 p.m.
Money was tight as they paid off their loan and paid for home improvements.
“We had times where we went to the supermarket with Eing picking up stuff and putting it in the cart, and me taking it out.
“We have had more than one occasion where we did not have enough money to feed ourselves: we have found that popcorn makes you full. “
Thomson says he couldn’t have owned his own home without the help of his friends, Peter and Sylvie Bishop.
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“When we found the pitch, he came out with us to see it and he never passed judgment. He just watched and listened and. . . offered $ 275,000, and that was it.
The house now has a spare bedroom which they call “Peter’s bedroom”, and his friends sometimes come from their house on Mount Eden.
However, Thomson says he feels annoyed by banks’ reluctance to lend to independent traders.
“In the five years of renovation, I have never been without a job. Even when we got the compliance code on the house, the banks still didn’t want to know.
“We had a debt of $ 350,000 with private funding, we were both working. My wife had worked at Kaiwaka Clothing for at least three and a half years.
The couple eventually got a loan, transferring their mortgage to ASB.
“It’s not just home prices that make it difficult for first-time buyers. The banks are holding this country back. It’s like a club that you are not allowed to join.
He says the government should change the system so that banks make more offers to first-time buyers, and could even guarantee a certain percentage of loans if necessary.
These days, Thomson says he and Eing “live like kings.”
“It’s amazing to sit in your own house. We are lucky that a friend helped us, but not everyone has this opportunity.