Middle Income Housing Solutions for Credit Unions and Members
Providing practical approaches for middle income housing solutions beneficial to Credit Unions and members. Addressing the lack of assistance for middle income housing and the needs of Credit Unions, developers, and members for quality housing solutions, loans, and affordable payments.
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CEO Round Table Innovation, Integration, NextGen Leadership
OPPORTUNITIESFOR CREDIT UNIONS IN THE RESIDENTIAL HOUSING INDUSTRY OBJECTIVE Provide a practical approach to providing middle income housing solutions for members in a manner that is financially beneficial to the Credit Union and by extension to its members. 2
GENERAL HOUSING SITUATION Low Income Housing - Government Assistance High Income Housing - No help needed Middle Income Housing - Little to No Help Available (THE OPPORTUNITY) 3
PARTIES AND INTERESTS CREDIT UNIONS DEVELOPER Supply of quality housing solutions at a reasonable profit level Build a portfolio of good quality loans MEMBER Demand for affordable quality housing solution 4
MEMBERS SITUATION Low level of savings Have a good job with income sufficient to make monthly payments depending on structure of the loan. Does not own land or is making minimum payments on land that will take 6 years or more to be paid in full. Does not quality for a government low-income house. NOT INTERESTED. Looking for a higher level of housing. 5
MEMBERS SITUATION Looking for at minimum a 3 bedrooms, 2 bathrooms house on an adequate lot size (approximately 6,500sf). Recent University Graduate with a good paying job but student loan payments negatively impacting ability to qualify for a home loan. Busy at work Unable to babysit contractor/builder. 6
THE MEMBERS NEEDS Low or No down payment (5%) A loan amount sufficient to build a quality middle income house reflective of his/her status. Monthly payments that fall within the Credit Union s requirements thus enabling them to qualify for the loan amount they wish for. 7
THE DEVELOPERS NEEDS Construct residential building at a fair profit. Adequate cash flows to avoid construction delays which are costly to all parties. Prompt and timely stage payments (labour). Build quality properties that help to promote and advertise his/her services. Continuous flow of houses to build. 8
THE CREDIT UNIONS NEEDS Be of service to its members as best it could Housing Solutions Build a portfolio of good quality loans. Lend to members on terms that are profitable to the institution and by extension to its members. 9
NUTS AND BOLTS OF MIDDLE INCOME HOUSING PROGRAM Target Market Nurses, Teachers, Police Officers, Civil Servants, mid-level office workers, recent university graduates, young professionals. Monthly Income of $5,000 - $7,000 10
NUTS AND BOLTS OF MIDDLE INCOME HOUSING PROGRAM Illustration Assumptions: $6,000/mo. income Debt Service at 45% = $2,700/mo. Loan Terms: 30 years 6% p.a Down Payment 5% Loan Amount $465,000 Member Deposit $ 23,250 Property Price Land $488,500 Construction 6,500sf @$12.5 = $78,000 $410,500 Transfer Tax (Labour + Materials + 12 15% Profit) Legal Mortgage Separate Construction Agreement Separate Agreement Stage Payments 11
THE PURCHASE PROCESS - DEVELOPER Select Lot location and size, and House Design (3 2 bedrooms 2 bathrooms and 3 3 bedrooms 2 bathrooms) Lots and designs at fixed prices (per square foot) Determine lot price and house price Basic information collected on a form and a $2,500 refundable deposit paid. Member s form is forwarded to the Credit Union to start the loan application process. Upon approval construction commences. 12
Arrangement Options Developer 13
QUESTIONS 14
