New style contributory mortgage
Contributory mortgages may have had a bad rap recently but that hasn't stopped one financial planning firm from developing a new style product.
Wednesday, July 12th 2000, 12:00AM
In the past couple of months Harts Reeves Moses and Sovereign have had to step in and offer some of their investors their money back and Lombard failed to raise sufficient money in a contributory mortgage to fund a rescue package for the Ballantyne property in Katikati.
Despite these problems Money Managers, in association with National Mortgage Brokers, have developed what is understood to be the first Capital Secured Contributory Mortgage, released under the new Contributory Mortgage Regulations.
Under the schemes investors' capital is protected through a shortfall insurance underwritten by Lloyds of London.
"This is an exciting development in the burgeoning contributory mortgage market. Essentially, the shortfall insurance offers investors greater security than a term deposit from your bank," National Mortgage spokesperson Neal Nicholls, says.
On top of the capital security, the loan will also be secured by way of first mortgage.
Money Managers' marketing director, Alasdair Scott says this type of investment will appeal to bank investors who typically think of their bank as a "safe" place to invest.
"It is extremely rare to find an investment that offers a high return, with the added advantage of capital security," he says.
Money Managers and National Mortgage Brokers have spent six months developing the investment
The first of these mortgages is the $16 million Downtown Medical Contributory Mortgage which will pay 9.75 per cent per annum, for a period of twelve months.
The proceeds of the mortgage will be lent to developer Mahuhu Development Trust for the development of a medical centre at Quay Park next to the old Auckland Railway Station.
At present there is a 50 per cent pre-commitment by medical practitioners in the form of signed agreements to Lease or Heads of Agreement.
Quay Park will include retail, residential, office, entertainment and hotels.
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