By Brook Sabin
Does an interest free home loan sound too good to be true?
A charitable trust claims to provide just that and one day hopes to become a mainstream alternative to banks.
The Liberty Trust now faces being deregistered as a charity despite making no money, and helping hundreds of needy people.
In her small West Auckland house Bronwyn Palmer does some pretty amazing work.
She has fostered children for nearly 40 years and has also looked after terminally ill babies.
“They're pretty sick when you get them, oxygen tube feeding that kind of thing,” she says.
But she would have lost her home 10 years ago, had it not been for an interest free loan from the trust.
“I think I cried when I first heard I’d got it, I was just overwhelmed really.”
The religious based trust is open to anyone, and has lent more than $18 million over 21 years, mostly to first home buyers.
Say you want a $200,000 mortgage.
The first thing you need to know is that you won't get your money for 10 years at the earliest. You spend that time donating 20 percent - in our example that's $40,000 - to Liberty.
Then you get your loan interest free to be paid back over seven years. That would be $2380 a month or about $595 a week - significantly cheaper than a traditional loan.
“Most people pay hundreds of thousands of dollars of rent or mortgage interest over their lives, but because we lend without interest people can repay their mortgage quite swiftly,” says Kerryanne Dalgleish, of Liberty Trust.
Charles Macdonald investigated the trust and says it is robust - although people need to fully understand, you can't get your donations back.
“Once they've accepted that, I don't think there's any risk there is an expectation of getting a mortgage at a later date, and my cash-flow analysis showed that those mortgages would be available,” he says.
And there is one last benefit. Remember that $40,000 you donated? You can claim a third of it back in tax rebates.
But now the Charities Commission is moving to deregister the trust because 3 News believes Liberty doesn't satisfy its stated “charitable purpose”, which is to “advance religion”.
But the Liberty Trust isn't fazed.
They say it would still provide substantial savings and hope to one day become a mainstream alternative to banks - to help more people like Ms Palmer.
3 News