Property Options have been around for many years and commonly used commercially between land owners and developers. However matching the needs of senior home owners with working investors to enable equity release for living is a relatively new concept.
At Position For Certainty have developed a solution which offers a smarter alternative to a reverse mortgage, downsizing the family home or traditional property investment for those looking for more financial certainty. We call this the SURE Property Option©.
The concept behind the agreement is to enable a homeowner to have financial certainty regardless of market conditions. As there is no actual lending involved, there is no interest rate risk. Your existing equity is preserved so their cannot be any “negative equity” or depletion of your existing equity as a result of capitalized interest.
In simple terms the SURE Property option is an agreement that enables a senior homeowner to sell the uncertainty of the potential future increases in property value (Capital Growth) in exchange for the certainty of a regular fixed monthly payment (Income Supplement).
The agreement ensures that the homeowner can afford to keep their home, preserve their equity and have more money for living without affecting the age pension. The ultimate result is financial security today and financial certainty for the future.
The biggest advantage of the SURE property option is financial certainty. Existing Equity it preserved and never eroded. The income stream is fixed and ongoing up to 15 years. Unlike reverse mortgages or Home reversion schemes there is no capitalized interested eroding home equity or discounting of existing home equity.
Homeowners receive a fixed capital growth on their property of 3%p.a regardless of the performance of the property market which can be enjoyed to fund a more comfortable lifestyle.Because the funds are a contribution to the eventual sale of the home in most instances the funds do not affect your age pension entitlement.
The SURE property option provides progressive instalments for up to 15-20 years. Reverse mortgage lenders currently only allow for a maximum of 10 years of progressive payments. With reverse mortgages should the property not increase in value and you exceed the borrowing cap you are left with no more access cash and potentially no equity.
The SURE property option may also be suitable if the youngest person on title is less than 60 years of age which is not the case with reverse mortgages. Contact us TODAY
The only way the investor can execute his right to purchase your property under the option agreement is if the last remaining owner passes away, the last remaining owner is relocated to long term age care, you decide to sell or the expiry of the option term which is normally 15-20 years from the date of the agreement.
What are the negatives?
On the maturity of the property option (generally after 15-20 years) the investor has the option to purchase your property. The investor will pay you the original option value, and has contributed a premium of 3% on top of the original agreed option value to you as cash flow for the right to purchase the option. On sale of the property you have the right to a 5 year renewable lease option to enable you to remain in the property at market value rent.
If the property market appreciates in value greater than 3% plus any interest cost that you would have had if you carried a reverse mortgage for the same period of time, you will miss out on potential equity.
The issue is, who knows how long rates will remain low or how much the property market will appreciate in value. We only have to reflect back to the great depression which represented almost two decades of stagnation.
Currently there are only two companies that specialize in these types of property options. We are the only company that provide this type of solution to Queensland based homeowners. Independent from banks and large corporate entities we have the ability to provide win/win outcomes for both parties of the agreement.
We believe the preservation of home ownership is fundamental to the financial security of our aging population and the economic stability of our country.
Our SURE property Option not only gives senior Australians financial certainty, but also eliminates property investment obstacles’ for the working Aussie to enable them to participate in the capital growth of property with less risk and no need for finance or large cash deposits.
For the investor, the SURE property option is a long term Growth investment that can be held either directly or through the establishment of a SMSF. This can be done with very little capital. Contact us TODAY