PROBABLY comparatively few people who buy a house pay for it cash down. As a temporary measure a bank may advance part of the purchase price, provided the clients credit is good. The charge made is usually one percent, above bank rate, with a minimum of five per cent., and the deeds of I he property or the land certificate have to be left as security. This is a useful arrangement when, let us saj a man Avishes to build or buy a new house before he has disposed of his old property.
The great popularity of house purchase by instalment through building societies is proved by the fact that in this country building societies advanced no less than £90,228,000 during 1931.
When applying for a loan from one of these institutions a modest survey fee is charged, and the societys offer is based upon the surveyors report. As a typical example, we will assume that a property is priced at £500. The society would probably advance up to 75 per cent, or 80 per cent, of the valuation of the house. In other words, the loan would be £375 to £400, the difference of from £100 to £125 representing the purchasers deposit.
Some prospective house-owners cannot furnish such an amount. When developing an estate a, builder frequently has an arrangement with a building society under which the latter advances above 80 per cent.of the valuation of the property. Some societies also work in connection with an Insurance Company whereby in approved cases advances may be made up to 90 per cent, of the purchase price or valuation, whichever is the lower.
When the offer is accepted various legal formalities are necessary, but the society is usually able to keep the charges to a minimum, and there are certain stamp duties. Most societies allow a purchaser to repay an advance over any period up to 20 years. The 15 to 16 years term is the most popular. A borrower may sell his property at any tinio, and if he so desires, the purchaser may take over the mortgage by arrangement with the society. A borrower is not tied to the property in mortgage until the expiration of the repayment tenn.
Monthly repayments include the repay-ment of principal and interest, which in many cases is very little higher than a normal rent, and the borrower has the satisfaction of knowing that in due course the property will become his absolutely. Some societies reserve to themselves the right to call in an ordinary repayment mortgage on giving notice, but this is not the case with all of them.