Soaring house prices, especially in the southeastern capitals, are causing many beleaguered first-home buyers to consider more unconventional means of entering the property market, including getting the deposit down.
Alternative means of entering the property market include dividing the cost of the deposit among friends and family, or splitting the cost with a builder. Such arrangements are being facilitated by banks, brokers, and sharing websites.
Single mum Yolande Buckley, who previously rented in Western Melbourne, thought she had enough savings to purchase a three-bedroom house for herself and her children.
After months of fruitless searching, she realised that even with a budget of $350,000, she still needed at least another $20,000 to $30,000 to buy either a house that was ready for occupancy or one that needed extensive renovating.
Her mortgage broker introduced her to Joint Property Australia, and she now co-owns her home with a builder.
Joint Property Australia was founded by Paul Ebbels, who developed a strategy which allows homebuyers to take an affordable loan on a portion of the house while a company-matched investor funds the rest of the purchase.
“If we do nothing and leave things the way they are now, then the investor, with the help of negative gearing, will take an unprecedented hold on property ownership in this country; a hold that will be very difficult to recover from," Ebbels told The Australian Financial Review.
Under a typical model, the buyer takes out a loan of 60% of the home value and the investor provides the other 40% on a separate loan. Moreover, the bank assesses the buyer on assets that count towards the loan.
The homeowner and investor are tied together in a joint property contract that stipulates an investment period at the end of which the homeowner, having obtained enough equity in the home, buys out the investor. The homeowner also pays the interest on the investor’s loan during this period.
Ebbels uses a proprietary algorithm to produce a set return for the investor’s joint deposit, which is usually higher than the official cash rate (the average is usually 2.75%). Capital growth on the whole property eventually reverts to the homeowner.
Buckley’s builder advanced just over $20,000 to help her build a new home in Bacchus Marsh, west of Werribee.By using the website, she and her builder were able to come to a feasible understanding, which in turn helped her “get the home that would otherwise [have been] out of reach.”
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