Page 2818 - Week 09 - Thursday, 26 August 1993
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(2) Mortgagors face the same benefits, expenses and risks of home ownership as any home buyer.
Under the HomeBuyer and HomeBuyer Plus programs, mortgagors are provided protection in that their monthly payments are income geared. Currently, monthly payments are limited to 27 per cent of the gross household income. This means that mortgagors are assisted during those periods they need loan repayment assistance (for example, low income and high interest rates) and repay the assistance when their income and financial circumstances improve.
Therefore, mortgagors will accumulate a debt, called deferred assistance, during those periods their monthly payments are below the standard loan instalment (that is, the amount required to pay the principal credit foncier loan at the prevailing interest rate). This occurs in the early part of the loan term and during periods when there is a loss of income or an increase in the interest rate. Unlike bank loans, the deferred assistance is not fully capitalised onto the principal loan. Instead, there is currently no interest charge on HomeBuyer deferred assistance and a rate equal to CPI (currently 1%) is charged on HomeBuyer Plus deferred assistance.
In relation to specific events:
(a) the total debt on HomeBuyer and HomeBuyer Plus loans is not related to movements in the CPI but are influenced by changes in the home loan interest rates and household incomes; however, growth in property values will be offset against the increase in the total debt;
(b) mortgagors can seek a repayment review when their income decreases, including periods of unemployment, which will reset their monthly payments to 27% of the gross household income; deferred assistance will be provided if the new monthly payment is below the standard loan instalment; and
(c) where mortgagors are faced with a long term financial difficulty and the prospect of losing their equity in the property, the ACT Housing Trust will examine alternative housing solutions with them that will more appropriately meet their current housing need.
(3) As the HomeBuyer and HomeBuyer Plus programs are income geared, the ACT Housing Trust reviews the gross household income each year on the anniversary of the loan and resets the monthly payment to 27% of the income. This process is applied while deferred assistance remains outstanding.
Where mortgagors have repaid the deferred assistance, their home loan is managed in the same way financial instiutions manage credit foncier loans. The interest rate is based on the prevailing rate charged by the Commonwealth Bank of Australia for standard variable rate home loans.
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