« Alternative Finance, Terminating building societies | Main | Obtaining Mortgage Bond Finance Continued »
Obtaining Mortgage Bond Finance
By arlene | March 8, 2009
The building society movement is the financial backbone of the private residential property market, for it is these institutions which have the financial means to provide home loans in the form of mortgage bonds.
The movement originated with so-called ‘terminating’ societies towards the end of the 18th century, when individuals with money to save pooled it on a regular monthly basis until everyone in the group was housed. The popular ‘permanent’ building societies of today were formed, when the pool of funds available to the terminating societies was supplemented by capital borrowed from those who did not necessarily need a home but had surplus money to invest which could earn interest from those who required a loan to purchase a home. The chief aim of the permanent building societies was to provide a safe home for money, and money for the home. Both types of building society are still in operation.
It had the following aims and objects: ‘To assist deserving people in the community to build their own homes; to achieve an improvement in the character of these homes; and to offer to the diligent and careful, a means of profitable investment which will encourage them to better husbandry of their monthly or weekly wages than is at present where no particular incentive is held forth’. These fundamental principles remain the same today.
A ‘building society means an association of persons the principal object of which is the making, out of funds derived from the issue of shares to and the acceptance of deposits from the public or from subscriptions by members, of advances for any purpose upon the security of the mortgage of immovable property‘. This refers only to property in an urban area as opposed to rural or farm property.
In order to provide prospective home-owners with funds for mortgage bonds, the building societies have to offer attractive investments to draw in funds in the first place. These comprise:
Savings accounts have a minimum balance of 50c and are operable by anyone over the age of 16. Withdrawal of funds is easy and interest on deposits is normally calculated on the basis of minimum monthly balance. Special savings accounts tailored for larger sums needed at short notice offer a higher rate of interest, but are subject to certain restrictions on withdrawals and require a minimum balance of about $200.
Transmission accounts allow investors to make cheque or debit order payments. Interest is based on minimum monthly balance and there is no limit on the number of cash withdrawals.
Subscription shares in the societies currently provide a tax-free yield which is compounded annually. They are good for savers requiring the discipline of regular monthly contributions and payments of as little as $1 a month are acceptable over periods from three years upwards, although it is possible to apply for early repayment after 18 months.
revolving subscription shares essentially consist of a series of 36 subscription share accounts opened progressively each month for three years. From the end of the 36th month, an account will mature each month, providing a monthly tax-free dividend to the subscriber, plus the capital necessary to keep the scheme revolving indefinitely.
Indefinite period paid shares pay half-yearly dividends which are taxed in the hands of individuals on the same basis as company dividends, that is, tax liability can be reduced from complete exemption to one third. Regarded as long-term investments, the shares can be redeemed at the society’s discretion, subject to at least three months‘ written notice after 18 months. Building societies are entitled to issue a special class of indefinite period paid shares, offering tax-free dividends, for five years from date of issue to individuals within a stipulated limit.
Fixed period shares offer a guaranteed fixed rate of dividend and cater for investors requiring fixed-term investments of five years or longer. They are obviously attractive at times when interest rates appear likely to fall, but with certain exceptions they cannot be redeemed prior to maturity, although they are transferable.
Fixed deposits offer interest rates increasing with the length of the deposit, which usually varies from one to five years. They constitute a binding contract between the depositor and the society for the period stipulated.
A state-assisted home-owner’s saving scheme is available from the building societies as an incentive towards saving the initial deposit required to purchase a home.
Investors in fixed deposits and shares, with the exception of fixed period shares, who require temporary additional capital may pledge these investments to the building society for a short-term loan at a rate of interest about one percent higher than that being earned by the investment.
Possibly related posts: (automatically generated)
Obtaining Mortgage Bond Finance
- Obtaining Mortgage Bond Finance Continued
- Alternative Finance, Terminating building societies
- How much do you be aware: Mortgage Bond Finance continued
- Institutional Financing Methods Part 4
- Banks and Mortgage Finance (Residential Mortgage Loans)
- If you are the real estate agent, how to assist the Buyer to Obtain the Finance
- The Completion of Mortgage Loan Application Forms continue...
- Property Sale Guide: The Role of the Conveyancer continue...
- Questions and answers for your Property, Contracts and the law, get actions to avoid the legal Pitfalls part 2
- Price and Size, Make the right Buy
Topics: Market, Property, loan funds | 6 Comments »
March 9th, 2009 at 2:34 am
MBNA is also the parent of MBNA America (Delaware), N.A., a national bank that offers mortgage loans, aircraft loans and business card products. … Offer Mortgage Products
March 9th, 2009 at 3:30 am
Loan amount (
– - five Years 10 Years 15 Years 25 Years Debt Consolidation Remortgages Advice & online application for any one wanting to clear debits & loans by remortgaging their home … … Home Improvement Loan
July 9th, 2009 at 6:21 pm
In addition, you can write the RoadLoansCheck for any amount greater than $7, 500 and less than your approval amount so you choose the loan amount that is right for you. … Auto Loan
July 10th, 2009 at 6:48 am
Bank foreclosures &mash; also termed Real Estate Owned (REO) properties &mash; represent great opportunities to acquire real estate at prices well below market value. … Foreclosure Sale
September 23rd, 2009 at 10:57 pm
Fixed rate mortgages in lifetime tracker, which guarantees mortgage borrowers’ mortgage rate after the completion of their fixed rate period. … Residential Mortgages
October 12th, 2009 at 10:08 am
Do you pay all your credit obligations on time, including mortgages, credit cards, store charge cards, home equity loans, auto loans, finance companies, and personal loans The greater the number of accounts without late payments, the better the score. … Auto Loan