1. Moving the Goal Posts: The Growing Deposit Gap Problem
Here is the problem. The price of houses is going up all the time, therefore you need to create a bigger and bigger deposit. It may take many years to create enough deposit to satisfy bank lending requirements.  Banks normally require you to save a 5 - 10% deposit if you're a salary and wage earner.  If you are self employed they will want at least 20 per cent. Add costs of 3 - 4 per cent, and you can readily see that you will need to save tens of thousands of dollars if you're buying in any city in Australia.  The reality is that most people who start a savings plan give up after a few months. The years pass by, yet you are still no closer to owning your own home.  Ring any bells?

   How We Solve the Deposit Problem

After you have taken possession of the house, you will make a payment similar to what you would pay if bank finance was in force now.  During this period you will create equity through a reduction in the amount outstanding.  You may also create equity as a result of an increase in the value of the property, over and above your buy price.  This could happen because of a natural lift in house prices in the area and/or because of home improvements that you have made. 

Once you have created enough equity and satisfied other bank lending criteria to qualify for bank finance, you can then settle the transaction with the investor (and HBE), and take ownership of the property.  Title to the property will then pass to you.

2. How Banks' Lending Criteria Can Work Against You
Banks not only look for a minimum deposit, they also check your credit history and ascertain your ability to service a loan. Therefore if you are to qualify for a home loan you will need to satisfy them on these 2 points. We use our rent buy plans as an opportunity to get your financial house in order. It will give you time to sort things out. If the income is a bit low, you can focus on how to increase it (second job, part time work for the wife, more overtime etc).  The thing is that awareness is always the first step towards positive change. Once you are aware as to WHAT you need to do, then your brain will go to work looking for solutions. We have seen it happen time and time again how people lift their game and make the changes necessary to reach their goal. But it starts with awareness.

   Serviceability Problems
Serviceability requirements vary from bank to bank. Please Contact us on 3312 0253 for the latest information.

   How Credit Cards Can Affect Serviceability - Big Time
If you have credit cards or other loans in place, the bank will deduct these payments when assessing your income. Even if you have a nil balance on your credit card, they will assume it is fully drawn and will assess you on that basis. Ouch! It is important for us to know your current commitments so we can help you formulate a Rent Buy plan that will manage or eliminate your current debt load in an orderly way.

3. To Qualify For Bank Finance You Must Start Planning NOW
If you don't have a plan, you won't make forward progress. The chances of failure are high. The question is 'do you stay renting and keep saving' or do you move up to one of our Rent Buy plans whereby you live in the house you are going to eventually purchase, whilst at the same time building valuable rent credits and sharing in any accrued capital gain. We can help you develop a simple Rent Buy game plan, that will show you the best way forward in an orderly, predictable way.

4. 'Buy' Now - Or Wait and Save Up Your Deposit?
Some people say ‘we’ll keep saving until we get the full deposit together’. But if prices continue to increase, then the deposit target will continue to grow. Many people have found the deposit target out of reach, and just give up. Meanwhile you continue to live in a house that is not yours, with the ever present risk that the owner will sell - with you getting shifted along, once again. Is that what you want? 

It may take years to qualify for bank finance.  So why wait?  We can get you moving along the path to home ownership much quicker. In fact, many of our clients moved into their own home - just two or three months after we first spoke to them. In some instances we did it in a few weeks. So don’t delay.  Get onto the first rung of the ladder NOW, and enjoy the fruits of your commitment.

If you stay renting you will probably only have one way to create your deposit - savings only.   On the other hand with our Rent Buy or Vendor Finance plans, you have additional firepower - equity sharing.  When was the last time the landlord shared their capital gain with you?   Well, with our plans, our investor will share any capital gain with you.  

5. The Real Costs of Buying a Home
Don't forget that when you buy your home you will need to allow perhaps 3 - 4 per cent of the purchase price for costs.  Costs can include Lenders Mortgage Insurance, Stamp Duty, and Legals. Under a Home Buy Express Rent Buy Plan, costs are negligible.

6. How to Have Your Cake and Eat It Too!
Want to buy a good house in a good suburb? Sure. Most people we talk to want that. Problem is that often they can’t qualify for enough finance dollars to enable them to do just that.

One of our Home Buy Express plans is called the Vendor Finance plan.  This plan enables you to live in the home of your choice, for not that much more, than if you had bank finance in place. Our low start version offers a lower initial weekly payment profile than any bank finance product.  Another advantage of this plan is that the deposit requirements are much less.  So, if you really do want a better home in a better suburb, this low start plan may be perfect for you.  Ask your Home Buy Express consultant about this plan when you meet him.

7. Tax Free Capital Gains Await You
We say that financial security begins with home ownership.  One of the reasons for this is the way the government treats profits that derive from the family home.  Currently no tax is paid from any profit you make from your home. You can begin to build wealth and financial security right now by joining millions of others who have said ‘yes’ to home ownership.

FINANCE QUESTIONS AND ANSWERS

How Does Your System Work?

We specialise in helping people into their own homes. This can be done via our Rent Buy plan or vendor finance. These plans are simply used as stepping stones to bank finance, which should be your overriding objective. Sometimes applicants can qualify for bank finance immediately. If so, we can refer you to our affiliate www.zaphomeloans.com.au . If you can only qualify for our Rent Buy Plan, one of our investor partners will buy a house for you. You then live in and enjoy the house, whilst making improvements to the house, if you wish. 

The weekly payments you make will be more than market rent (actually it will be very similar to payments under a bank finance plan). However, a generous 'rent credit' will be credited against the purchase price when your bank finance is finally approved. Our objective is to help you qualify for bank finance in the shortest time frame possible. At that time, you will settle with our investor. As part of the settlement process, any rent credits together with your share of the capital gain will be credited to you.

What Fees Do You Charge?

We charge a Home Buy Application Fee of $660. If your application is not approved, the fee is fully refunded.

What Deposit Do I Need?

Depends on the plan we can approve you for. Our Rent Buy plan may only require a 1 - 2 per cent deposit.

What Are the Steps in the Buying Process?

Step 1 is to pay the Home Buy Application Fee and have your application assessed. Step 2 is find a house that suits your requirements (assuming your application is approved). 

How Long Do These Steps Take to Complete?

It really depends on you. It could be as quick as a few weeks. The main thing is for you to have your financial house in good working order. The last thing we want is for you to buy a home too soon. That is why we give so much emphasis to ‘Financial Fitness’. You have to be financially fit to buy a house, and our program will help you do that - at your own pace.

Does the First Home Owners Grant Apply?

Yes, several of our home owner options qualify for the grant ($7,000). 

Should I Take a Home Buy Plan Now, or Wait For Bank Finance?

This is a hard question to answer. It depends on a number of factors. But generally we would say that if it is likely that you can qualify for bank finance in the relatively near future (say, within 6 months), then it would be better to wait and take the bank finance option. On the other hand if bank finance is not likely to be approved in the short term, we recommend that you seriously consider one of our Rent Buy Plans.

Finally, Is There Any Advice You Can Give Me?

Yes. The best advice we can give you is to not be too choosy about the property you buy. The most important thing is to get onto the home buying ladder. The home may not be the ultimate, it may not be a palace, but at least you are on the first rung and have a secure roof over your head. In time you will be able to trade up to something better.

Facts You Should Know

1.    RENT BUY
Brief Description.   A short term home purchase plan that features a rent credit arrangement, which will help you build your deposit.

Time Frame.  1 -2 years

Type of Contract.   An option contract is used.  This contract gives you the right, but not the obligation, to buy the property on pre-agreed terms.

Option Fee.  An option fee must be paid.  This fee is usually equivalent to 1 -3% of the contract price.  If you complete the purchase, this fee will normally be credited towards the purchase price.   This fee gives you valuable rights such as:

• Fixed Price.  Your option price will be fixed for the term of the option.
• Security.    You are protected as you are the only one who can purchase the property during the option period. 
• Transferability.  If you, as the option holder, do not exercise your right to purchase the property, you can sell the option to a third party. 

Exercise of Option.  At the expiration of the option period, if you have not exercised your option to buy, the option and the option fee you paid will be forfeited.   If you need more time to organise your affairs so you can complete the purchase, the seller may agree to ‘roll over’ the option for another period.  However, the financial arrangement including the agreed price will usually be adjusted.

Rent Credits.   Part of the weekly ‘rent’ you pay will be credited towards the purchase price.  This will help you build your deposit.

Weekly Payment.  Your weekly payment will be negotiated according to the needs of both parties, including yourself.  The benchmark will usually be based on the market rent, plus an additional weekly sum.  Most, or all, of the additional sum will usually be credited towards the purchase price.  This amount is called Rent Credits.  If you do not purchase the property most if not all of the rent credits may be forfeited, unless otherwise agreed with the seller/vendor.


2.    VENDOR FINANCE

Brief Description.  More correctly called ‘vendor terms’, a vendor finance plan is similar to (but not the same as) home loan finance.  It is not really finance as no funds are being lent to you, but there are similarities in that an interest rate is charged on the amount owed to the vendor. 

Weekly Payment Formula.  Weekly payments are based on the balance outstanding, the interest rate charged, and the term of the contract.  This sum is calculated according to a standard principal and interest formula.  

Principal Component.  Part of each payment you make will be credited towards the balance outstanding.  In the early years this will be a small amount, but will gradually increase to the point where the principal component will be greater than the interest component, exactly like a true principal and interest loan.

Time Frame.   Up to 30 years.  However, in practice these arrangements usually last for 2 – 5 years.

Type of Contract.   An instalment contract is usually used, although sometimes a special option contract is also used (which is known as the ‘Notional Home Finance Plan’).  Amongst other things, the instalment contract regulates the interest rate formula, the purchase price, and the deposit.  

Deposit.  A deposit must be paid.  This deposit is usually equivalent to 3 – 8% of the contract price.  If you complete the purchase, this deposit will normally be credited towards the purchase price.   This deposit gives you valuable rights such as:

• Fixed Price.  Your price will be fixed for the term of the contract.
• Security.    You are protected as you are the only one who can purchase the property. 

Weekly Payment.  Your weekly payment will be strictly based on the following variables:

• Interest rate
• Amount owing
• Contract term

In order to create long term equity build up for you, the above variables will be factored into a principal and interest payment formula.

Interest Rate.   The interest rate charged will be higher than standard bank interest, but often lower than what would be charged by sub-prime lenders.

Payout Penalty.   A payout penalty will usually be charged for early or late settlement of the purchase.

Penalty Interest.  Penalty interest will apply in the event of late payment of instalments.

First Home Owners Grant.  In Queensland, once 12 months has elapsed, you may apply for the $7,000 First Home Owner’s Grant.

SUMMARY.  If you are confident that you can ‘finance out’ in less than 2 years, a Rent Buy plan will usually be the best option.  This is because of lower weekly payments, lower deposit, and no payout penalty.  On the other hand, if it is likely that you will need more than 2 years to organise your finance, Vendor Terms would normally be advised.  Please discuss the best option for your needs, with your Home Buy Express Consultant. 

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