Frequently Asked Questions

How is future capital growth during the Mortgage Alternative occupancy period shared between the consumer (Buyer) and the Fund (or other investor) that is on title?

We preagree the price using a growth factor currently modelled at 3% pa. No one knows what the actual property price increase will be over the next 10 years. Based on the last ten years, a $500,000 home 10 years ago (September 2003) would have increased by 69% at September 2013 even with the global financial crisis (GFC) (source: Grattan Report: Renovating Housing Policy” Sept 2013 athttp://grattan.edu.au/publications/reports/post/renovating-housing-policy/).

That is $845,000 today, if it were repeated, but there is no guarantee of that. If it was repeated (including another global financial crisis (GFC)?), for a $500,000 home, anything over approx $672,000 is yours based on current financial modelling. The Fund investors take the first $172,000 (approx) to cover the time value of money and attract their capital and for them to take on the debt instead of you.

If prices were flat for 10 years, you could walk away, investors would get their capital back and no growth, but receive 95% of your monthly payments as part of their return after costs which include insurances to protect their money and insure the home and your monthly payments. The other 5% is an embedded savings plan for your benefit, which you can take with you if you walk, subject to T’s and C’s including a client establishment fee.

Put simply, this is a mortgage incubator and safer and smarter while your equity in the property is low. Why give all future capital growth to the landlord and rent when there is MA? The mortgage was invented in 1190AD. That’s 825 years of no innovative thinking and we are changing that.

Can I settle my purchase early?

Yes you can.

The purchase price at settlement of your home is set up-front at the time when you sign the purchase contract and move in to the home. This means the buyer knows EXACTLY what the price of the home is to them when/if they choose to settle.

It is the pre-agreed price that the buyer can buy their home for at any time within the contract period. i.e. You must pay the pre-agreed ten year price.

Can you explain why Mortgage Alternative offers a legitimate new choice to a mortgage and why there is no loan and no debt until the buyer settles at the end of the pre-agreed 10 year period with a mortgage?

Hello Everyone. I am the Founder of Mortgage Alternative.

Did you realise that, unlike a mortgage, there is no loan with Mortgage Alternative until the end of the pre-agreed period (10 years). Let me explain more for you on how this works, as the purchase is a two step process.

Apart from the buyer’s monthly payment obligation to the Assquire investor or Fund, you (the buyer) have zero debt until the buyer settles their deferred purchase at the end of the pre-agreed period with the Assquire investor or Fund.

Step 1: The Fund (or an investor) buys the property of your (the buyer’s) choice from the vendor on usual terms so that you can occupy the property and move in, and make monthly payments to the Fund (or investor) (not rent payments and not mortgage payments). There is no mortgage, and you are buying the property of your choice from the Fund (or investor) with a 10 year settlement period – not renting it.

Step 2: You (the buyer), in turn, simultaneously contract to buy the property on deferred settlement terms from the Fund (or other investor) and must eventually choose whether or not to settle in ten years time at a pre-agreed price today. This puts you (the buyer) in control, not the bank. Your purchase price from the Fund (or investor) is pre-agreed and your monthly payments to the Fund (or investor) are fixed for up to ten years. No more worries about future interest rate hikes. No more worries about renting and saving a higher deposit while property prices move further out of your reach. More certainty. More peace of mind.

You as buyer (or an eligible relative) must live in the property whilst you save a full deposit and before you settle your full ownership of the property – something you simply can’t do with a mortgage as you need the deposit and to pay mortgage insurance up front if you have a mortgage. Your MA payments (unlike a mortgage) include an embedded savings plan that accumulate to help you settle at the end of the MA period, and are added to your share of any capital growth over the pre-agreed period of up to ten years, so that you can settle with your embedded equity, your savings and a traditional mortgage with a bank. After MA, you will have a ten year savings history with MA, and you were in your own home all through the process of preparing you safely for the mortgage market!

The Fund (or investor) remains on title until the buyer settles with the Fund or Assquire investor by taking a mortgage, which the buyer can do at any time (at the pre-agreed ten year price) – to protect the Fund/ investor. Look at the downloadable fact sheets on the website www.mortgagestarter.com.au for how it works and frequently asked questions.

For your certainty, your contract protects your rights to the property throughout the pre-agreed period and the purchase price to you is locked in up front on a basis where the Fund /investor and the consumer buyer share future capital growth until the end of the pre-agreed period when you may purchase at the pre-agreed price or walk away.

Sharing capital growth is fair, as both the buyer and Fund/ investor are contributing to the buyer’s usual deposit requirement and you get to move in with less fire sale risk, and get to lock the purchase price. That is fair to both parties and is how we get your deposit down to just 5% and provide you (the buyer) with the downside risk protection and ability to walk away at any time, if your personal circumstances change prior to the deferred settlement date, which can be up to ten years. The savings plan embedded in your monthly MA payments helps you to settle at the end of the pre-agreed period.

It’s not renting; it’s not layby; it’s not vendor financing; it’s not an operating lease. It’s a patented new financial services system that puts you (the buyer) in control.

It’s all about your choice now, rather than a choice among ten or twenty mortgages that all offer you largely the same inflexible mortgage contract that is almost impossible to walk away from, and which puts the bank in control if you run into unexpected difficulties, while your equity in the property is low. That can be very risky for you while your equity in the property is low, and let’s face it – the required deposit today is a bridge too far for many young people and recently divorced couples.

Best of all, there is no mortgage insurance up front to wipe out the deposit you worked so hard to save for years. There is no mortgage; there is no debt, other than your monthly payments to the Fund/investor. Less fire sale risk, and you are in your dream home with your loved ones. But you must meet our qualifying criteria and you must share future growth with the Fund/ investor until you settle. Is that the catch….or is that just fair? Well, if you’re currently renting, you’re giving ALL future growth to your landlord currently. Right? How fair is that?

Some say this is complex. It’s not. It’s just new.

It’s really quite simple. A stretched settlement period with more choice and less fire sale risk, in return for sharing capital growth until you settle your contract and a similar payment to a mortgage on a like for like basis.

Why not lodge an application to see if you qualify at www.mortgagestarter.com.au You will need to follow all of the registration prompts until you have completed our application form. As the product is expected to be very popular, early registrants will be given first priority.

Stop giving future capital growth to your landlord and get professional advice to properly consider whether the risks of a mortgage are right for you whilst your equity in the property is low. Ask your adviser how much equity you have left if the property has to be fire saled, after agent’s selling commission and advertising costs, and after mortgage insurance is added to your mortgage liability.

If you think this product might suit your personal circumstances, lodge your application today and don’t delay.

We will do our best to introduce you to one of our trained and accredited real estate agents, and to match you to a home in your preferred suburb and an Assquire investor. Please understand that we are still growing our distribution channels across South East Queensland, and training and accrediting the early agencies in this unique new compelling patented system.

Do I have to pay Lender’s Mortgage Insurance?

Mortgage Alternative customers do not pay lender’s mortgage insurance because the customer is not borrowing any money.

Do I need a deposit?

You will likely require a deposit of approximately 3-5% of the purchase price of the property 5-10% for  homes or apartments under construction). Mortgage Alternative and Fund Investors require a component of deposit from buyers because it demonstrates saving discipline.

How are homes valued?

A Mortgage Alternative fund acquires all homes at a price that is supported by an independent, third-party valuation from a professional property valuation firm. This price forms the basis of the customer purchase contract and is escalated by an agreed annual growth factor for the agreed life of the contract.

The purchase price is agreed in the contract of sale (between the buyer and the Fund), having regard to the preferred settlement term of 5, 7 or 10 years, so the buyer knows the EXACT price they will have to pay whenever they choose to settle on their purchase (ie, it is the same purchase price whether they choose to settle in 10 years or earlier). If the actual market value of the home is higher than the pre-agreed purchase price when the buyer settles, it represents a terrific outcome for the buyer! If the buyer chooses to settle on their purchase and they find that the market value of the home is less than their pre-agreed purchase price, they can either accept the loss and settle, or they can walk away from the contract altogether. This is one of the reasons why Mortgage Alternative is less risk to home buyers than a standard mortgage.

Notwithstanding this, Mortgage Alternative acts as a mortgage incubator, so the intention with all purchase contracts is to have the buyer in a position to re-finance the home with a standard mortgage by the time they are due to settle, through the combination of an initial deposit, monthly contributions to their equity base, plus any capital gain of the home over the pre-agreed purchase price at settlement.

How does it work?

Buyers can choose to select a newly-built or established home or apartment from our stock list, or alternatively, bring a home to Mortgage Alternative for our consideration. Not all homes will be accepted by our Fund investors who reserve the right to reject homes for any reason, including the degree of structural soundness, age and condition of the home, its location, and whether or not it is suitably well maintained. Subject to their approval and valuation, a Mortgage Alternative Fund (funded by Australian institutions and superannuation funds) buys the property and contracts to sell it to the buyer with an agreed settlement scheduled for 5, 7 or 10 years in the future.

The buyer occupies the property immediately and commences a regular monthly payment, a component of which accrues as your deposit. At any time the buyer can complete the purchase or exit the purchase and walk away with their accrued savings (less any outstanding fees and  their share of any capital loss). To receive their accrued savings, buyers must also occupy the property for at least 12 months.

During the initial offering, only ten-year settlement contracts will be available to matched qualified purchasers and homes accepted by Mortgage Alternative Fund investors.

Mortgage Alternative truly is a more secure and flexible way to property ownership.

How does Mortgage Alternative negate the impact of rising house prices?

  • Mortgage Alternative does not have to negate the impact of rising house prices.
  • Thanks to property prices being pre-agreed and pre-arranged with MA, consumers do not have this worry for up to ten years, and it’s one of the key benefits of the product. This is why you share the capital growth with the Fund investors in that period.

For example if a property increases from $500,000 to $845,000 over ten years (the average increase from September 2003 to September 2013: source Grattan Report on Renovating Housing Policy September 2013 http://grattan.edu.au/publications/reports/post/renovating-housing-policy/), the Fund would receive around the first $179,000 of this and the consumer the other $166,000.

This $166,000, together with the embedded savings plan, helps you to get a mortgage at the end of the MA period….and all the while you are enjoying the benefits of being in your dream home – without the usual downside risks and upfront costs of a mortgage.

And you are building an asset base behind you – unlike renting. So why would you do anything else now that this is becoming available – seriously! The same is true, even if you are trading up and you feel you can invest the equity in your home more profitably elsewhere (say in your business). This is not just for first home buyers. Talk to your financial adviser.

If I have the qualifying 5% deposit, but really like the downside risk protection that you offer, how does taking Mortgage Alternative assist me to save a deposit for a traditional mortgage while living in the home?

Everyone needs to learn the discipline of saving, and for some, the temptation to spend can be ever present, so a little continual assistance with the discipline of saving for a home is welcomed. Did you know that with Mortgage Alternative (MA), and whilst you are living in the home, approximately 5% of your monthly payments go into an account in your own name as forced savings, to assist you to settle your purchase, at the end of the pre-agreed Mortgage Alternative period, with a traditional mortgage from a bank.

During our launch for our first qualifying customers, we have set the preagreed period at ten years, to assist to give our customers the lowest monthly payments possible, but still get you into a home or apartment sooner, with settlement in up to ten years time. And with no mortgage and so no debt or mortgage insurance hanging over your head during the MA period. Now that’s innovative thinking. Living in your home while you save your full deposit.

Just like the responsible lending obligations on a bank, you must first have 5% deposit as savings to qualify for MA. But MA will give you downside risk protection that a traditional mortgage simply does not offer you. Go to share of losses explanation for more information.

Must they be genuine savings or are non-genuine savings (e.g from a grandparent’s estate or a gift from parents or a close relative) ok? MA agree that no two cases will be the same. Many factors are considered, and the focus is on good applicants with 5% deposit, good credit history and good income levels, more than the source of the deposit on its own. Lodge your Registration to see if you qualify at www.mortgagestarter.com.au.

If you had 5% deposit saved, why would you consider Mortgage Alternative? Why not apply for a traditional mortgage and take Mortgage Insurance?

This deserves a detailed answer. There are many aspects to consider, so home or apartment buyers can consider carefully the features outlined below. I’m sure that much will be written on this in the press and on line in weeks and months to come, as news of this innovative financing system spreads. so it is best to get the facts out there for all.

Using a $500k house as an example with 5% deposit, a buyer with a traditional mortgage would have $475k of debt hanging over their heads plus around $15k of mortgage insurance – total $490k of debt, compared to no debt with Mortgage Alternative (there is no loan). A buyer purchases from our Fund (or other personal Assquire investor – it could be their current landlord) on a deferred settlement basis over ten years, and (if not already a tenant) moves in immediately. Their mortgage opportunity is at the end of the ten years.

In addition,there is the unique ability with MA to walk away at any time during the ten years prior to their settlement, with potentially reduced risk of a mortgagee or “fire” sale (if you’d had a mortgage),  or a lower loss in the event of a fire sale, if the buyer loses their job unexpectedly in future or unexpectedly split up with their partner or suffered serious health problems…..or if the property’s market value falls in future. The Fund (or other Assquire investor) remains on title until the buyer settles with a mortgage. So in the event of personal mishap, the buyer simply exercises their contractual right with MA’s Fund (or other Assquire investor) to vacate the property and need not be involved with the property from that time, once they have met their contractual obligations under the MA Fund’s (or other Assquire investor) contract (the Fund/investor is on title, so it deals with the property from there, and may offer it to another new MA customer (just like a tenancy in a shopping centre churns) or alternately sell the property).

A buyer simply cannot walk away with a mortgage, as the buyer must repay the 490k plus pay the selling costs (advertising and real estate agents commission of about 13k plus) leaving the mortgaged buyer potentially with a loss of all or part of their 5% deposit, plus any loss on the property’s market value – IF they’d taken a mortgage.

In addition, mortgagee in possession sales of homes can be 90% or 85% of the property’s market value – sometimes even lower in a hurried sale (whereas the Fund/ Assquire investors have other options and often the benefits of something called portfolio risk management, which consumers with mortgages don’t usually enjoy).

Then there is the potential for bank default interest on the mortgage or continued mortgage repayments if you can’t sell quickly and you have a traditional mortgage. With MA, there should be no default (and so no default interest owing) if you exercise your consumer Take Back rights under your contract to vacate the property at any time and not settle with the Fund/investor. However, if you do not settle as intended, you will have paid the client establishment fee out of your 5% deposit, as this is the investor’s protection that you truly do intend to buy the home, not just “rent it”. This is a home purchasing business model, not a rental model. If you settle, the Assquire investor/Fund replenishes/refunds you the client establishment fee in full. That’s fair.

Recent bank surveys show many Australians are concerned currently about the risks of potential loss of employment, especially with government downsizing and the mining support services sector experiencing difficulties. These events can be very unsettling when you have a big mortgage. Unemployment may not occur, but it is risky to take a mortgage with only a 5% deposit, if you have ANY concern about you or your partner’s future employment at any time over the next five years. And no one knows where property prices will go in future, nor do they have a written job guarantee. These risks (to greater or lesser degrees) have always been there with mortgages and are part of a mortgage contract and home purchase contract with little option. Until now.

Mortgage Alternative is simply another purchase option (purchase, not rent) to a traditional mortgage with far easier exit and more control and downside risk protection for the buyer, and each person needs to consider what is best for them in their own personal circumstances and having regard to their own view on future property prices and their appetite for risk.

MA also mandates insurance benefits for the Fund/ Assquire investor that are of indirect benefit to our MA customers, some of which are not ordinarily available with all mortgages.

Based on enquiries to date of the insurance market, we expect up to two years of a buyers monthly MA payments to be insured, subject to T’s and C’s, in the event of certain insurable events like certain causes (but not all) of loss of employment.

In addition, the return of all or part of the buyer’s savings component of their monthly payments on exit (again subject to T’s and C’s) compares favourably to a mortgage, where on exit, a buyer does not get ANY of their interest payments returned by the bank. You get zero interest payments returned on exit from a mortgage.

There are many other benefits with this innovative patented system of home financing. It is not just a case of having 5% savings – genuine or otherwise.

Some property developers we have introduced MA to have said to us: “It is all about buyers with lower deposits saving on expensive lender’s mortgage insurance”. Mortgage brokers have called MA a “game changer”. Institutions we have met have described MA as “compelling”. Lawyers have congratulated us on a great innovation. Real estate agents have said to us “This will go really well”.

In reality, for renters, it is also about not giving all of your future capital growth to your landlord, and getting a foot on the property ladder and locking the property price today.

To us, the flexibility and ease of exit in adverse unforeseen personal circumstances is the biggest selling feature and gives buyers more certainty and more peace of mind – with added downside risk protection if market prices fall – those features are simply not offered by a mortgage or any rent to buy. Banks are not in the business of taking asset risk. They are there to protect the savings of depositors. Mortgage Alternative is to be equity funded by private property investors that see Assquire as a means to more than double their net rental yield each month (on average over ten years) and/or Institutional investors who understand the risks of investment in residential property, and who appreciate the particular additional embedded risk mitigants that this patented system offers to both our Fund/ investors and MA buyers alike. They appreciate the annuity revenue streams that arise from monthly occupancy fees derived in the REIT market, the corporate structuring and design of which has had an influence on the design of MA – for the benefit now of home purchasers, and to reduce the risks of people still renting in retirement in 20 or 30 years time.

As far as comparing MA to a mortgage or renting, each buyer or renter needs to consider all of the features and benefits and all of the options as in some cases a mortgage may be preferred and in others, Mortgage Alternative or even continuing to rent may indeed be the best option.

But first, they must see if their personal circumstances qualify for MA by lodging an application/registration form at www.mortgagestarter.com.au

There is no obligation to take MA. This early phase will begin with individual property investors  (Assquire investors) to allow us to confirm the levels of consumer demand, and to confirm levels of overall expected consumer demand – to allow institutional funders to appropriately queue the early capital needs, for an efficient and sustainable business.

For the early registrants who qualify, they will enjoy all of the specific features and benefits of MA, and should first obtain independent financial advice from an accountant or financial planner or other adviser on whether Mortgage Alternative is suitable for them, or whether a traditional mortgage or renting is better for them in their own personal circumstances.

The HFGA team hope this further clarifies the comparison to a mortgage with a 5% deposit.

To conclude, an early registration allows priority  consideration of your application and as this product is expected to be very popular (albeit not the best option for all consumers), it is considered best for those who might be interested to register early and complete the application without delay.

Is this just a low-doc loan?

No. Mortgage Alternative is not a lender and Mortgage Alternative is not be lending you any money!

Mortgage Alternative is more like a kind of “mortgage incubator”, where Mortgage Alternative arranges for home buyers to joint venture a home of their choice with some major Australian institutional investors, until such time as the home buyer can afford to settle on their home with a standard mortgage lender.

The best part is, if the buyer’s circumstances change and they choose not to buy the home, they simply vacate and walk away – a unique feature not available with a mortgage. This reduces the buyer’s risks of a “fire sale” exit and allows another Mortgage Alternative customer to be found for that home within an agreed time frame (usually 120 days), or for the home to be sold.

This is inflated rent and forced savings. Rent to buy, right?

Mortgage Alternative looks a little bit like a lot of things that it is not. It is similar to vendor financing, lay by, an operating lease, a rent to buy and a mortgage….but it is none of those. It is a patented new purchasing and financing system where you simply buy the property with an extended or “stretched” settlement period, but can have occupation of it immediately after contract, with a series of special conditions including the ability to walk away at any time with all or part of your savings, if you suffer adverse personal circumstances. Those same conditions also protect the investors’ money, and the underlying system or business model is carefully designed to do the same.

You share profits or losses with institutional investors who effectively supply the finance and initially go on title to protect their investment, but a series of risk protection factors are embedded into the product’s design and the business management system to significantly reduce the prospect of losses. You pay for that and the guaranteed right to walk away if your circumstances change adversely, instead of paying for mortgage interest, but just like a mortgage, you are buying the property – not renting it. Rent to buy is usually (but not always) associated with property developers who are selling properties they have developed but may not be able to sell quickly because of market conditions. As the vendor, they assist to fund you into occupation with rent to buy models, but it has not been very successful as a business model in the past, as the developer has its money tied up for years, and property developers usually don’t like to do that for a mere “inflated rent”.MA is not associated with any property developer and we do not land bank or hold empty houses, although our institutional Funds can and will purchase properties selected by a consumer (as a matter of free choice) as the property that they wish to purchase and live in. Our Funds will only buy approved properties for approved consumers that THE CONSUMER FIRST AGREES to purchase/buy to live in with a settlement date and price pre-agreed for ten years time. A mortgage is not inflated rent, and neither is Mortgage Alternative.This is innovation and the business management system is being patented around the world.  At the date of writing (February 2014), the system is already trademarked in over 30 countries around the world including all of Europe, the United States, Australia, Singapore and China. This is its global launch, right here where it was invented.

What do parents of Gen X and Gen Y think of Mortgage Alternative?

Did you realise that if a buyer has the qualifying 5% deposit, or even 10% or more deposit, but really likes the downside risk protection that MA offers (that a mortgage doesn’t offer in times of unemployment or relationship breakdown), taking Mortgage Alternative can assist buyers and their partners to develop and maintain a forced savings discipline while they live in the home and save their full deposit for a traditional mortgage.
Anecdotal evidence from our market soundings is that parents of adult children (Gen Y and Gen X) tend to like this feature for their children. So do grandparents.

Furthermore, we believe MA is entirely consistent with Government policy to encourage people to save for a home, but MA goes further as it does so whether you are a first home buyer or have owned a home before.

And best of all, you can take all or part of those accumulated savings with you if you choose not to settle and vacate the property (subject to T’s and C’s).

A much more flexible contract than a mortgage, in today’s society. The mortgage was invented in 1190 AD. It’s time to update to today’s world and help our younger people and recently divorced couples back into home ownership.

What does the monthly payment cover?

Under the Mortgage Alternative model, buyers pay a monthly payment to cover rates, agreed body corporate fees, property taxes, pre-agreed maintenance for reasonable wear and tear, and a reasonable financial return to the Assquire investor or Fund that finances and owns the property. The payment also includes a contribution into a savings account in the buyer’s name which accrues over time to form part of the deposit on the house when they want to settle on the purchase. Most importantly, the payment includes property and personal insurance (for the benefit of the Assquire investor or Fund and, indirectly, the buyer as occupier and purchaser. Insurance coverage includes life insurance and TPD cover plus up to two years of payments to the Assquire investor or Fund in the event of certain circumstances like sickness and accident leading to job loss. Some insurances may be replaced by current insurances for death and PD already held through an MA buyer’s superannuation. HFGA takes care of all of this as part of the services it provides to the Assquire investor in credit and insurance assessing MA applicants.

One of the great advantages of a Mortgage Alternative agreement is that buyers don’t pay lender’s mortgage insurance or legal costs on top of their monthly payments!

Under your contract, the monthly payment increases by a fixed amount each year, typically around current CPI (we use 3% at the date of writing). This gives the buyer certainty of the payments required over the period of the contract (the full payments over the contract period appear as a schedule to the contract you sign up front), unlike a mortgage where the buyers are either exposed to future interest rate movements or are forced to predict interest rates movements and lock in a fixed interest rate.

What happens with my deposit?

With a traditional mortgage, the deposit is paid to the seller of the new home as part of the purchase price, with the bank loan making up the remainder.

It is no different with Mortgage Alternative – the deposit is paid to the solicitor’s Trust account or real estate trust account of the Assquire investor or Fund that owns the home the purchaser has contracted to buy in ten year’s time (or earlier at the ten year price, should they elect to Take Early under their contract).

The security for the deposit is the executed contract of sale with the Assquire investor or Fund. Because of this contract, the Assquire investor/Fund cannot sell the property to someone else. The Assquire investor/Fund can only transact the property with another party in the event that the buyer chooses not to settle or defaults on the monthly payments to the Assquire investor/Fund.

When the buyer chooses to settle, either at the contracted settlement time or before, the buyer’s original deposit (as replenished by the Assquire investor/Fund), their accumulated savings component of their monthly payments over ten years plus any capital growth over the pre-agreed settlement price forms their equity in the property that they can use to secure a standard mortgage and settle their purchase. If the buyer is unable to settle the purchase, for whatever reason, the buyer’s deposit is not replenished or refunded and there is no share of losses or selling costs for the MA buyer to vacate.

The MA buyer may be liable for any outstanding monthly payments, accelerated wear and tear or damage to the property not otherwise covered by the Assquire investor’s/Fund’s insurances.

What if a buyer already has a 10% or 12% deposit? Should they still consider Mortgage Alternative?

Of course they should. Whilst they may only require a 5% deposit to qualify (and assuming they meet our other qualifying criteria), there is nothing to stop them from applying the other excess 5% or 7% to another safe investment and holding onto that accumulating asset until they are ready to move out of our new MA product and into the mortgage market. They can apply it then, to assist them to settle with our Assquire investor/Fund.

Of course, when they do settle with our Assquire investor/Fund and enter the mortgage market, they will then lose the property price and interest rate protections that MA gives them, and will again (as with all traditional mortgages) be subject to the usual property price risks and (unless it is a fixed rate mortgage) interest rate hikes risks going forward.

MA is not just for people with only a 5% deposit. It’s a matter of choice, and weighing up all of the features and benefits. Those with a 20% deposit would most likely be better off taking a mortgage, but it is a matter for your financial adviser, who knows all of your circumstances and financial affairs.

Who knows, if you have 10% or 12% deposit saved, if you decide to take MA, you may be able to apply the excess 5% or 7% amount to your small business, or another income producing asset. It’s up to you and your financial adviser and you need to seek advice. At least now you have some new options to consider.

MA is about giving you more choices.

What if the Assquire Investor or Fund goes broke?

It is worth pointing out that the purchaser’s contract to buy a home is executed with either an Assquire investor who has been credit assessed  under stringent HFGA standards or with a Fund that is intended to be capitalised by major Australian financial or property institutions. It is therefore highly unlikely that the Assquire investor or Fund will go broke. Nevertheless, people’s circumstances can change over time.

The Assquire and Mortgage Alternative products have a number of design features specifically engineered to reduce default and enforced sale risk. Also remember that buyers have no obligation other than the deposit and monthly payments that arise from the contract executed with the Assquire investor or Fund. It therefore stands to reason that if buyers have more certainty and less risk, buyers are less likely to default, and the Assquire investor or Fund therefore is less likely to have a financial problem. Assquire investors earn a projected 6.8% net yield after all fees – not the usual 2.3% to 2.75% and their gearing or debt is controlled, with cross collaterisation restricted. This is all to mitigate risks to the MA buyer. In short, the Assquire investor is credit assessed by HFGA too! Not just the MA buyer.

However in the extremely unlikely event that the Assquire investor or Fund does go broke, the purchaser’s contract remains valid and special rules apply to assist MA buyers to achieve a take early, to increase your chances of settling the contract early.

As we saw in the recent GFC, a number of Funds became “distressed” due to high debt levels. In this event, it is the Fund’s responsibility to find additional capital that will enable it to deliver its contractual commitments to customers. In the worst case scenario, a receiver or liquidator would be appointed and it is then their responsibility under the law to sell the contract to another financial institution.

Mortgage Alternative is a service provider to the Assquire investor or Fund and receives revenue from the Assquire investor or Fund for the services it provides. If the buyer pays the Assquire investor or Fund the monthly payment as required by the contract, HFGA will be paid its fee from the Assquire investor or Fund. If the buyer can’t pay and cancels their contract, the Assquire investor or Fund either obtains another suitable qualifying customer for that particular home or it sells the home.

What kind of home can I buy?

Homes must be new or, if the property is an established home, must be in excellent structural condition. Recent quality refurbishments of bathrooms and kitchens may assist to encourage Assquire investor or Fund acceptance of the home for its purchase.  We do not guarantee that our fund or our Assquire investors will accept all homes selected by buyers, nor do we guarantee that our MA buyers will like all Assquire investor homes.

The Mortgage Alternative model works best for Fund Investors on homes that are brand new or near new, but it is clear that many consumers prefer well-maintained established homes because of their location or simply the greater availability of choice – established homes that are structurally sound, well located and well maintained will therefore be accepted from Assquire investors, with appropriate building inspection and market valuations conducted on HFGA’s behalf by independent parties skilled in those disciplines. New stock is preferred as a risk reduction measure for investors in the Fund, as new homes require less maintenance and are covered by building and product warranties.

Mortgage Alternative will source a range of new homes from builders and developers, and also source established homes through collaboration with specially trained and Assquire accredited real estate agents. Several agents in SE Queensland have already undergone training in the products and are offering Assquire contracts and MA now.

A list of these homes is provided to potential Mortgage Alternative customers at http://assquire.com.au/property-listings where MA buyers can choose the home they wish to purchase from the list.

Alternatively, MA buyers or Assquire investors who are current landlords can present a well-maintained and structurally sound home of their choice for consideration by HFGA and Mortgage Alternative for use with this system. Provided these homes are acceptable to the Assquire investor/Fund and meet the requirements of HFGA’s Property Risk Unit, Mortgage Alternative may be able to accommodate such requests. Vendors of properties must be licenced to use Assquire. See http://assquire.com.au/vendor/ for details.

The fund acquisition mandate concentrates on detached homes, however some apartments may also be included.

What role will Mortgage Alternative play in society?

With capital city home values rising and first home buyers now at an all time record low (12.3% at the date of writing – February 2014) as a percentage of all owner occupier finance commitments in general, it is time for a new and better way to get our younger people into home ownership. The mortgage was invented a very long time ago.

Mortgage Alternative is expected to become the new way – the future in home ownership in the pre-mortgage days. It will not replace a mortgage. It will assist people to get a mortgage more safely, further down the track, and do so with more flexibility than a mortgage offers.

It will do this using well established techniques in property ownership, used for decades in the Australian Real Estate Investment Trust (REIT) sector, and in the process, it will offer Australian superannuation funds and international investors more diversity of investment class than retail, commercial office and industrial property alone – with the ability to invest in MA’s Home Owning Funds with a competitive stable and predictable return over ten years.

Australian super funds helping fulfill the great Australian dream of home ownership for our children and our children’s children. This is our Founder’s vision and that of his management team who have worked hard to bring this to market over many years.

Personal Assquire contracts mean that individual property investors can now do this too – rather than the current predominant reliance on long dated and uncertain future capital gain, with a little over 2% net rental yield – and assist the government to get younger people into home ownership whilst delivering themselves higher stable predictable yields – a win/win for the entire community, and leaving the government to focus on the most needy who sadly are often not credit worthy for home ownership and mortgages or MA.

First home buyers need help, and this product can deliver it with the assistance of Australia’s individual residential property investors and institutional capital markets, including the 1.7 trillion dollar Australian superannuation fund market. The returns from this patented financing system certainly warrant their investment, and the risks in diversified residential property investment can be much better managed using the risk protection features embedded into this new financing system’s design. We have already undertaken considerble presentations to the institutional capital markets and fund managers off the early consumer demand from the earlier 2014 research phase or Part One registration process in Brisbane, so now in April 2015 onwards you can actually apply for the product in live application mode at www.mortgagealternative.net.au/register

HFGA believe that in time, MA will also make the Australian banking sector stronger, as it lead generates and lead qualifies customers more safely towards a conventional mortgage, reducing mortgagee in possessions, which is an expensive and time consuming process for banks and very difficult for the poor occupants that often (but not always) suffer mortgagee or “fire” sale consequences and long delays through the unwinding of their mortgagor responsibilities.

There is also a possibility that as more renters move into home ownership using MA in future years, it will ease the congestion and any potential future rental crisis in the private rental market as population increases and immigration swell the future demand for housing, where over 2.1 million Australians currently reside – a third of which have been renting for over 10 years. (source: Grattan Report: Renovating Housing Policy” Sept 2013 Page 18 at http://grattan.edu.au/publications/reports/post/renovating-housing-policy/).

Keith Burchill Founder – Mortgage Alternative

As MA is now available to customers to formally apply for, what impact will it have on parental guarantees and on the decision to rent or buy?

The decision to rent or buy with a mortgage has always been a very difficult decision to make, because of the pros and cons and the impacts on lifestyle. A large part of this has been the risks inherent in a traditional mortgage, whilst your equity in the property is low. And there are many articles around warning parents not to go guarantor for their children, because of those same risks. They are real.

But what if there was a better way to mitigate those risks without a parental guarantee or losing a large part of your savings/deposit in mortgage insurance up front? What if we had the TIME to let these risks settle out with the time value of money, and yet have the benefits of a home ownership lifestyle today?

That is what Mortgage Alternative represents. Firstly, if a buyer believes that property prices are going to go to hell in a handbasket over the next ten years, the buyer would NOT take Mortgage Alternative. The buyer would rent.

Secondly, the buyer has to be prepared to forego part of the uncertain future capital growth and share it with the Assquire investors/Fund investors who are putting up the rest of the deposit with the buyer. That is only fair, but as you are giving that up, MA is far from “too good to be true”. There must be a price paid to reward the Assquire/Fund investors and their insurers for taking the risks off the buyer. MA displaces Mortgage Insurance where the buyer loses a large part of their precious little equity.

MA is far less risk than a mortgagee or fire sale arising if you have a mortgage, when your equity in the property is low. Go to our explanation of share of losses at the link below and you will see why parents are at significant risk going guarantor and helping their children to a 20% deposit, and why MA is simply a better way:

Share of losses explanation

Who is eligible for a Mortgage Alternative product?

We hope that in the near future a Mortgage Alternative product will be available to most people who meet standard lending criteria such as having a full-time job, a demonstrated ability to save money and a good credit history.

Haigslea Finance Group Australia Limited (HFGA) are specifically looking for people with a combined gross household income of over $100,000 per year for couples or $80,000 per year for single applicants, stable employment or business and a deposit of 5% of the purchase price.

Interested consumers are urged to lodge an application early, as these criteria are subject to change without notice. The Mortgage Alternative team are expecting demand for the MA product to be very high.

Who owns the title to the home?

The short answer is that a Mortgage Alternative investment fund (or a Personal Assquire Contract (PAC) investor in the case of individual residential property investors) owns and holds the title to the home. The title is transferred to the buyer only when they settle on the purchase of the home in five, seven or ten years.

The reason Mortgage Alternative structures the agreement in this way is to keep the Assquire investor’s/Fund investors’ capital as “safe as houses” while delivering the buyer an opportunity to get on the property ladder for a modest deposit, with protection from property price decline and an easy exit. The Assquire investor/Fund also provides the buyer with the option under the sale contract to walk away from settling the purchase and vacate the property within 30 days at any time.  If they do, the Assquire investor receives ALL of the capital growth to date and has enjoyed the higher average 6.8% yield after all costs, so they are unlikely to be troubled by you vacating, if your personal circumstances demand it. They can simply reassquire the home to another MA buyer.

However, you need to be certain this product is best for you, and that you are serious about home occupation and ownership for up to ten years.

The Assquire investor/Fund retains the title as security to be able to provide the buyer with the ease of exit.

By adopting an initial ownership model in this manner, the buyer has no debt to the Assquire investor of Fund,and no obligation other than their monthly payment. There is NO MORTGAGE!

This means there is less risk of a “fire sale” if the MA buyer suffers adverse personal circumstances, such as the loss of  their or their partner’s job or divorce, during the Assquire investor’s or Fund’s initial ownership period. This gives Mortgage Alternative customers peace of mind while their equity in the property is low.

Why do you need a pilot?

This is a pilot program for a ground-breaking innovation in home financing and ownership that is already patented or trademarked in thirty countries around the world and patent pending in over 40  countries – including Australia. It was invented right here in Australia.

Mortgage Alternative is a new product in a market that is highly regulated for consumer protection. At this stage, HFGA has not yet applied for the financial services licenses required to operate their own fund but as a licensing of IP model, it may never need to – simply licensing the IP to those that have such licenses. The Board of HFGA is in discussions with institutions currently and still considering their options, as we work with individual Personal Assquire Contracts that do not require such licences, as no funds are pooled and no credit is offered (although most of the preparatory work for this has been done and the application is in the process of being prepared for submission).

It follows that HFGA Group do not yet have funding in place for the first ownership fund,  nor do they require it – as Personal Assquire investors already have their funding and/or their homes for purchase by MA buyers who qualify by lodging an application on this website and becoming approved by HFGA.

Fund investors first need to know the credit quality of potential customers and the homes they are to be matched to, which is the purpose of the Personal Assquire Contract phase of applications now underway and beginning the process of matching you to a home and an Assquire investor, with assistance from builders and licensed real estate agents. Right now we are speaking with many of the real estate agencies, property developers and builders operating in South East Queensland and in the Greater Melbourne area . If you see a home that you like, we encourage you to also refer the builder, developer or real estate agent to us.

Postscript: The pilot has now moved in April 2015 to live application phase for the first time – we are assembling customers to process into homes – this is no longer market acceptance and research only, as it was in 2014.

It is already clear that the consumer and real estate agency/developer/builder markets will love this new innovation and that institutions will appreciate the returns on offer which are predominantly yield based – not reliant on capital growth.

It is therefore important that you lodge an Application Form form during this phase in order to receive priority consideration for matching to Personal Assquire investors (see http://assquire.com.au ) who are now also applying to earn higher yields from their properties.

Register today to avoid missing out. This, along with our current campaign to receive distribution support from mortgage brokers and others and support from property developers, builders and real estate agents to supply housing stock for Mortgage Alternative, will assist us to move our first customers into homes.

Customers must meet the credit profile required. Haigslea Finance Group needs to ask you a number of questions to ensure you meet the Mortgage Alternative requirements. The more information you provide, the more this will  improve our ability to assess whether you will qualify for our product. Lodge an Application Form today to see if you are eligible.

Why hasn’t this been done before?

This is a unique concept in the Australian market and there appears to be no similar product anywhere in the world.

The standard mortgage has been around for centuries and during that time has undergone very few iterations. It is difficult to innovate around established thinking and practices, particularly within the financial services industry, which is a highly-regulated environment dominated by only a handful of large institutions.

It has taken more than eight years of work by a team of dedicated professionals to develop and design the Mortgage Alternative product, in order to meet the needs of the Customer, Fund investors and to comply with legal requirements. The product is now launched to live applications and you have the opportunity to participate in this exciting innovation and get into a home you can now, surprisingly, afford.

Why should we trust this product?

This is a new and innovative way to acquire a home without using a traditional mortgage. It may take a bit more time for you to understand how it works, but it is perfectly legitimate and offers the following safety measures for your money:

  1. It substantially reduces your risk of a “fire sale” while your equity in the property is low. For more information on this please go to this page.
  2. You actually have NO DEBT, unlike a mortgage, until you settle your contract by securing a loan with a mortgage lender.
  3. Your deposit (to the extent it is not absorbed by government charges and establishment fees) is held in a solicitor’s trust account or real estate agent’s trust account, just as it is in a traditional sale and purchase. Assquire investors agree to replenish your deposit on ten year settlement or Take Early. This is all set out in the contracts.
  4. You move into the home owned by the Assquire investor or Fund immediately after you sign your contract and make you first monthly payment. The Assquire investor or Fund is trusting you to meet your commitments under the contract by allowing you to occupy the home prior to settling your contract. You are trusting the Assquire investor or Fund to meet its contractual obligations with you by paying a deposit up front and making monthly payments to the Assquire investor or Fund.
  5. The savings component of your monthly payments will be held in a savings account (a solicitor’s trust account) in your name.
  6. All of the fees charged by Mortgage Alternative Pty Ltd or HFGA are paid by an Assquire investor (or by a Fund that will be backed by respected Australian or overseas institutional investors). The Assquire investor or Fund has/will have contracts to pay Mortgage Alternative Pty Ltd  and HFGA on a fee-for-service basis. None of these fees are charged by HFGA or Mortgage Alternative Pty Ltd to the consumer, except for a small service charge on the Accumulated Savings Account to meet our costs related to your enquiries over the ten years related thereto.

Why use Mortgage Alternative?

The Mortgage Alternative solution gets the buyer into occupation of their new home, and onto the property ladder with certainty of purchase price years faster by not having to wait to save up a deposit of 10% or more, plus the various fees and charges such as stamp duty, legal fees and Lenders Mortgage Insurance.

The buyer also gets to lock in the purchase price today for settlement in 10 years.

The buyer makes one simple payment each month, and the buyer has no mortgage debt.

Best of all, the buyer has all the control and reduces many of the risks normally involved with a mortgage based commitment – they can settle early (at the ten year price) or walk away from settling the contract to buy the property they have chosen at any time.