Shared Equity Scheme is here

Discussion in 'Property Finance' started by Qlds007, 18th Feb, 2007.

  1. Qlds007

    Qlds007 Broker,full time investor

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    Oh well looks like the 1st March is the launch date for the new loan product.

    It will run like this

    1) 80% lend from a Bank with interest charged as normal and standard loan repayments.
    2) 20% lend from a private superanuation fund with NO interest charged whatsover throughout the term of the loan and no repayments made.

    In the event of the sale the 2nd mortgagee takes 40% of the gain made in the property and you retain 60% of the gain. There is no timeframe restriction for this.

    The 2nd mortgagee also shares in any loss made on the sale of the property.

    LMI is payable on the 2nd mortgage only however given the lower loan amount is a relatively small payment.

    Certainly will spice up the market and provide a launching pad for those clients looking to get into a property which on paper is beyond them in serviceability or where maybe the wife is giving up work due to forthcoming pregancy etc.

    Very postcode restricted with NO regional lending whatsover and a max number of loans and value in each post code region.
     
  2. sailor

    sailor Member

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    Which super funds will get a bite at this cherry? Could I use funds from my SMSF?
     
  3. Qlds007

    Qlds007 Broker,full time investor

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    Hi sailor

    Regretfully these are large industry funds that will be lending the money but in saying that there is nothing to stop you doing it yourself.

    We have done many similar loans using our SMSF.
     
  4. sailor

    sailor Member

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    Thanks Richard...could I use my SMSF to lend money to my HBT to buy a property? I'm just asking cos I have an awful lot of money tied up in SMSF, but insufficient to go and pay cash for an entire IP in the SMSF's name.
     
  5. Qlds007

    Qlds007 Broker,full time investor

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    Regretfully not these days.

    Prior to 1999 then yes that type of arrangment was allowed.

    There is nothing to stop you assisting a purchaser (arms length transaction) by providing him / her with a 20% deposit and charging interest or agreeing to roll that up until the property is sold and take a share of the profits.
     
  6. Smile

    Smile Member

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    Who pays for upkeep of the property and out goings, rates etc?
    Is it shared 80 - 20 ? I doubt it!
     
  7. Qlds007

    Qlds007 Broker,full time investor

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    No as you are charged no interest on the 20% or in fact make no repayments for 25 years then cover the rates and upkeep.
     
  8. BV

    BV Think outside the square

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    Richard,
    Is this available in all states
    and how does it work?
    Does the bank offer this as a package deal
    or does a purchaser himself have to find the lender and a super fund willing to participate?
    cheers
     
  9. grossreal

    grossreal Member

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    hi richard
    can you refinance using this.
    and will they no doc/lo doc 70% and they cover the 30%, now thats a product.
    if you use one of these products and you wait for say 10 years can you equity lend against the equity growth without selling and will the mezz funder( I will call them mezz for this post) allow you to access the built up equity.
    is it only resi or are they looking at comm.
    if you have the 80% lend are they an attachment to your 80% lend or do you need to organise the 80% thru them or a group attached to them.
    is there a time frame to sell and whats the control that they wish to have on the investment.
    is the product here as yet and is it in sydney
    I would be very interested in what there criteria is.
    for me its the same as vendor finance back and that is the most profitable part of the deal as its the profit part and its a wonder why the others have not moved into that market.
    I will watch with interest this post.
     
  10. grossreal

    grossreal Member

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    hi Qlds007
    is the profit split at the end the profit less holding cost so if the 80% is a negative say 5k and you hold for 5 years so you have a neg 25k but then you sell and you have a profit of 200k and the split is 60/40 thats 120/80 but if you have 25 k losses then the profit is 175k and split 60/40 of the 175k.
    I would be interested in the split of costs as well as the split of profit.
     
  11. Qlds007

    Qlds007 Broker,full time investor

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    Gross

    No only full doc for owner occupiers.

    But first deal i have done was for $2M for clients buying on the water at Noosa. They could only service $1.6 but really wanted this house.

    So we did it by way of an EFM and they are wrapped.

    How much more will a $2Million house go up over a house with a purchse price of $1.6M is to be seen but it appealed to them not having to make repayments or be charged interest on the $400k.

    Yes product is here and is available in Sydney (Post code restricted) but only to O/O.

    BV to answer you question. It works in all States except Tassie but is very post code restrictive and has a max purchse price in each acceptable area. Let me know the post code you are looking at and I can tell you. No the deal comes a package 1st and 2nd mortgagee in one.
     
  12. BV

    BV Think outside the square

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    Hi Richard,
    Many thanks,
    Will they do postcodes 2206, 2208, 2171, 2173, 2763 ?
    cheers
     
  13. Qlds007

    Qlds007 Broker,full time investor

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    BV

    Yes and No. The maximum loans for each area are as follows:

    2206 = Not acceptable
    2208 = Not acceptable
    2171 = Yes acceptable Max purchase price - $629,587
    2173 = Yes acceptable Max purchase price - $556,326
    2763 = Yes acceptable Max purchase price - $622,128
     
  14. pmcintosh

    pmcintosh Member

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    There is already another shared equity scheme operating via Aussierealty.com with no money down, borrow total purchase price interest only etc. Check out their website and any comments would be welcomed. Also seems to be OK for investors as well.
     
  15. BV

    BV Think outside the square

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    Richard
    I guess this product is now likely to push prices up in the suburbs it's offered in. Hopefully other lenders will come out with similar products soon.
    Cheers
     
  16. Qlds007

    Qlds007 Broker,full time investor

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    Rismark have the patent on the product having spetn 4 year designing it.

    I am aware of a couple of others in the pipeline but non that actually also sahre any loss in the event of a sale.
     
  17. grossreal

    grossreal Member

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    hi all
    australand have also a product and have a half page add in the sydney morning herald for wolli creek.
    what the difference with vendor finance back to me it the same.
    but with vendor finance back you still keep the stamp duty savings for first home owners that you don't keep with shared equity lending.as the vendor finance it not part or equity owner of the property bon a 500k property thats about 25k and 20% is 100k but if you got vendor finance back you are in front.
    just a different way of looking at it.
     
  18. Qlds007

    Qlds007 Broker,full time investor

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    Gross

    One big difference is that you need to qualify for 100% of the loan with Vendor finance but with shared equity do not.

    Australand may have an advert but it will not be the same as one condition is the home must be at least 1 year old.
     
  19. Spectre

    Spectre Member

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    Hi Richard
    A few years ago I had a client who had 2 properties on the sunny coast which were in his super fund. The super fund was managed by AXA or something like that.
    He entered into a contract of sale to sell the 2 units but because the super fund had a greater valuation on the property than the sale price they wouldnt agree to the sale and it took 6 months for them to get another valuer to sort it out
    Can this have an impact in this situation and if so does the super fund offer to buy out its partners?
     
  20. Qlds007

    Qlds007 Broker,full time investor

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    In the event of a sale Rismark insist on having the property valued to avoid you selling the property to your brother at less than market value witht he sole aim to reduce the amount of the sahred equity profit.

    Time will tell but from what i have seen to date they are very professional in their dealings.