Australian Mortgage Options has launched a new home loan in an attempt to lure homebuyers back into the market amidst falling housing affordability.

Zero20 is designed to reduce repayments by offering 20% of the loan at zero interest and with zero repayments. The remaining 80% is a treated as a normal home loan.

"This means you get an interest-free loan of between $15,000 and $400,000 with zero interest charges and zero repayments for up to 25 years," explained Robert Projeski, managing director of Australian Mortgage Options.

The Zero20 home loan, which is essentially two loans in one, is similar to a product introduced by the Blair government to attract buyers back to the UK property market in late 2006. However, unlike in the UK where the lender and borrower share in the upside only, Projeski says both the lender and the borrower will share the upside as well as the potential loss of property value.

For example, if a property bought for $500,000 using the Zero20 Home Loan later sells for $480,000 - that is a $20,000 loss - then the interest and repayment-free component of the loan (originally $100,000) is reduced by $10,000, being 50% of the loss. The borrower has not only had a $100,000 interest and repayment-free loan, but now only has to repay $90,000 - not $100,000. If the property was later sold for $600,000, then the purchaser retains 60% of the profit share gain or $60,000 of the capital growth. Put simply, the upside or downside of the capital growth is shared.

Projeski expects the new package will benefit a wide range of buyers who are struggling to get a leg up in the property market as property prices and interest rates continue to rise.

"I've been in the industry 20 years and this is the most innovative product to get Australians into home ownership sooner," said Robert Projeski, managing director of Australian Mortgage Options. "In a nutshell, this loan reduces repayments, you can borrow more and get the property and lifestyle you want today."

Projeski believes the loan is perfect for people wanting to upgrade their existing property, or those wanting to refinance their existing loan, reduce loan repayments and ultimately improve their lifestyle.

Repayments and borrowing capacity on Zero20 is calculated on a lower amount because of the 20% zero interest and zero repayment component. This makes the loan more affordable overall and allows people facing more expensive real estate prices to get into the market sooner.

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