AU2015200184A1 - Home equity release plan - Google Patents

Abstract

The present invention relates generally to a method of releasing equity in real property and relate particularly to a methodology for releasing equity and residential property for aged home owners. The method involves the general steps of: 5 1) a vendor of the property entering into a contract of sale with the purchaser who acquires an entitlement to a specified share of the proceeds from a future sales of the property; 2) the purchaser paying the vendor a deposit representing a percentage of the purchasers share of the expected future sale proceeds whereby the vendor 10 releases equity in the property; and 3) completion of the contract sale by the vendor voluntarily, or their estate after their death, selling the property and the purchaser receiving the specified share of the sale proceeds and, where sale is effected prior to an anticipated date of completion, payment of an early proceeds rebate to the vendor.

Description

1 Home Equity Release Plan Field of the Invention The present invention relates generally to a method of releasing equity in real property. The invention relates particularly, though not exclusively, to a method of 5 releasing equity in residential property for aged home owners. Background to the Invention Financial institutions or banks in for example the USA and the UK have introduced a "reverse mortgage" which is essentially a loan offered to the home owner and secured against the property. The reverse mortgage is a capitalising interest loan where interest is 10 not paid until sale of the property on death of the owner. The reverse mortgage has been met with limited success primarily because the size of the capitalising interest loan in relation to the value of the home at the time of repayment is unknown. It is generally not possible in advance to determine: 1. the period of time before the home is sold; 15 2. the actual amount of the sale proceeds that will be received from the sale of the home; or 3. the interest rates that will apply over the term of the loan. The patent literature includes a number of US patents relating to reverse mortgages including US patent application No. 2002/0055905 and US patent No.s 6012047 and 20 5991745. These US patents disclose variations on the conventional reverse mortgage including a method for securitising a reverse mortgage, together with processing and loan recalculation systems for use with reverse mortgages. Summary of the Invention According to one aspect of the present invention there is provided a method of 25 releasing equity in real property, said method comprising the steps of: a purchaser paying a vendor a deposit representing a percentage of the purchaser's share of expected future sale proceeds from the property whereby the vendor releases equity in the property; 2 the vendor voluntarily, or their estate after their death, selling the property and the purchaser receiving the specified share of the sale proceeds; and where sale is effected prior to an anticipated date, payment of an early proceeds rebate to the vendor, the early proceeds rebate being a percentage of the difference 5 between the purchaser's share of the market value of the property, and the deposit. Preferably the anticipated date is determined based on the anticipated life span of the vendor, and the early proceeds rebate is paid when the vendor decides to voluntarily sell their property or dies before this anticipated date. Generally the payment of the deposit by the purchaser is not contingent on the 10 vendor repaying the deposit by way of principal and/or interest payments. The vendor may incur fixed administrative payments on entering into or on completion of the contract although no accruing interest, fees or other charges are payable. Preferably the percentage of the purchaser's share is calculated based on the present day value of the expected future sale proceeds. More preferably this percentage 15 represents a discounted amount relative to the purchaser's share of the current market value of the property. Preferably the purchaser acquires entitlement in the property without transfer of title in the property. Preferably the vendor is not required during the term of the contract or on its 20 completion to make repayments to the purchaser. Preferably the sale of the property further involves payment of excess proceeds where the purchaser's share of the sale proceeds exceeds a benchmark. More preferably the benchmark is calculated by reference to a benchmark rate which is a percentage per annum compounded. For example, the predetermined percentage of the difference 25 between the purchaser's share of the actual sale proceeds and the benchmark which is based on the initial value of the property increasing at the benchmark rate which may be set at from between 2 to 10% and the vendor may receive from between 25 to 75% of the difference between the actual sale proceeds and the benchmark. The benchmark rate may be set at a margin over an index such as the Consumer Price Index (CPI). 30 Preferably the vendor is an aged home owner or aged home owners. More preferably the aged home owner is at least 65 years of age.

3 Preferably the purchaser is a pooled entity such as a unit trust or a company. Detailed Description of the Preferred Embodiment In order to achieve a better understanding of the nature of the present invention a preferred embodiment of a method of releasing equity in real property will now be 5 described in some detail, by way of example only. The following examples or scenarios illustrate a preferred methodology for releasing equity in residential property for aged home owners. This includes a measure of the "cost of funds" to the vendor or aged home owner. In assessing the "cost of funds" relative to typical lending rates, this method of releasing equity effectively protects the aged home 10 owner from at least the following risks: 1. the value of their real property or home not increasing at a benchmark rate, for example 8.0% per annum compound, this risk being borne by a purchaser or in these examples a pooled entity such as a unit trust or company; 2. the longevity risks of the aged home owner which is carried by the purchaser. 15 3. fluctuations in future interest rates. The preferred methodology described is intended to be offered by banks or other financial institutions in the form of a home equity release product. The product of these examples has been coined as the Home Equity Lifestyle Plan or the HELP product. The key assumptions in the following examples/scenarios are as follows: 20 1. age of home owner at last birthday (assumed to be a single female) 75 years; 2. current value of home - $500,000; 3. HELP percentage 30%; 4. current market value of home subject to HELP product (i.e. 30% of $500,000) $150,000; 25 5. HELP deposit or initial cash sum - $94,900; 6. acquisition expenses (including GST) $2,200; 4 7. net initial cash received by aged home owner $92,700. Scenario 1 - Home sold in year 5 Item Amounts assuming value of home increases at: 0% 5% 8% Initial value of HELP Product's share at inception 150,000 150,000 150,000 Sale Value (100%) 500,000 638,140 734,664 HELP Product sale proceeds 150,000 191,442 220,399 Benchmark for Realised Excess Proceeds in year 5 220,399 220,399 220,399 Realised Excess Proceeds 0 0 0 Aged home owner's share (50%) of Realised Excess 0 0 0 Proceeds Early Proceeds Rebate 8,614 47,995 47,995 Total payment at settlement 8,615 47,996 47,996 Cost of funds (gross of expenses) of HELP Product to 8.0% 8.3% 12.0% aged home owner per annum compounding monthly Scenario 2 - Home sold in year 15 Item Amounts assuming value of home increases at: 5% 8% 10% Initial value of HELP Product's share at inception 150,000 150,000 150,000 5 Item Amounts assuming value of home increases at: 5% 8% 10% Sale Value (100%) 1,039,464 1,586,084 2,088,624 HELP Product sale proceeds 311,839 475,825 626,587 Benchmark for Realised Excess Proceeds in year 15 475,825 475,825 475,825 Realised Excess Proceeds 0 0 150,762 Aged home owner's share (50%) of Realised Excess 0 0 75,381 Proceeds Early Proceeds Rebate 0 0 0 Total payment at settlement 1 1 75,382 Cost of funds (gross of expenses) of HELP Product to 8.0% 10.8% 11.8% aged home owner per annum compounding monthly Scenario 3 - Home sold in year 30 Item Amounts assuming value of home increases at: 5% 8% 10% Initial Cash Sum 94,900 94,900 94,900 Initial value of HELP Product's share at inception 150,000 150,000 150,000 Sale Value (100%) 2,160,971 5,031,328 8,724,701 HELP Product sale proceeds 648,291 1,509,399 2,617,410 6 Item Amounts assuming value of home increases at: 5% 8% 10% Benchmark for Realised Excess Proceeds in year 30 1,509,399 1,509,399 1,509,399 Realised Excess Proceeds 0 0 1,108,011 Aged home owner's share (50%) of Realised Excess 0 0 554,006 Proceeds Early Proceeds Rebate 0 0 0 Total payment at settlement 1 1 554,007 Cost of funds (gross of expenses) of HELP Product to 7.2% 10.0% 11.0% aged home owner per annum compounding monthly The deposit or initial cash sum represents a percentage of the purchaser's share of the expected future sale proceeds of the home. This percentage is calculated based on the present day value of the expected future sale proceeds and represents a discounted 5 amount relative to the purchaser's share of the current market value of the property. The HELP Product sale proceeds in this example equates to 30% of the sale value. In these examples the benchmark rate for payment of excess proceeds is based on compounded growth at 8% per annum. However, this benchmark rate may vary and may for example be set at a margin over the CPI. 10 The realised excess proceeds are the difference between the HELP Product sale proceeds (purchaser's share of the actual sale proceeds) and the benchmark. In these examples the realised excess proceeds to the aged home owner amounted to 50% of the actual realised excess proceeds. This is illustrated in scenarios 2 and 3 where compounded growth in excess of 8% per annum is exemplified. 15 The early proceeds rebate is relevant where completion of the sale of the property is effected prior to an anticipated date of completion. Typically, the anticipated date of 7 completion is determined based on the anticipated life span of the vendor or home owner and the early proceeds rebate is paid when the vendor voluntarily sells the property or dies before this anticipated date. This is illustrated in scenario 1 where the home is sold in year 5 either voluntarily or on death at the age of 80 years. On the other hand, scenarios 2 and 5 3 are indicative of an aged home owner at the age of 90 and 105 years, respectively, who has passed the anticipated date of completion and an early proceeds rebate is not payable. The early proceeds rebate is a percentage of the difference between the purchaser's share of the market value of the property on entering into the contract of sale, and the deposit or initial cash sum. The early proceeds rebate is a feature of the HELP 10 Product intended to enhance its appeal to both the aged home owner and the purchaser. The early proceeds rebate works retrospectively and provides the opportunity to effectively have the benefits of a loan combined with the certainty of a sale. The applicant has an algorithm which calculates the amount of the early proceeds for various scenarios at the commencement of the contract. Once the sale proceeds are known then the actual early 15 proceeds rebate can be calculated using this algorithm. The term "initial discount" is used to describe the difference between the HELP Product's share of the property and the initial cash sum, for example in the scenarios given the initial discount is $55,100. If the home of the aged home owner were to be sold in the early years of the HELP Contract (either by the aged home owner or by their estate after their death), they would 20 forgo the full initial discount if it were not for the early proceeds rebate. The maximum early proceeds rebate is calculated for each individual aged home owner. The principal function of the early proceeds rebate is to ensure that the cost of funds should not be excessive in the case of an early sale of a home. The amount of the early proceeds rebate is calculated by reference to the actual 25 specified share (the "HELP Percentage") of the sale proceeds. It is intended that the cost of funds should not be excessive if house price growth is in accordance with the pricing assumptions and furthermore should not be too low in the event that house price growth has been less than assumed under the pricing assumptions. In other words, if the application of the maximum early proceeds rebate causes the cost of funds to fall below a 30 specified minimum rate the early proceeds rebate will be reduced. The early proceeds rebate cannot exceed the initial discount nor be less than zero. The following algorithms illustrate the manner in which the early proceeds rebate is calculated for scenarios 1 to 3.

8 Scenario 1 - Home sold in year 5 Cash Flow amounts assuming value of home increase at: Common Parameters C Initial Sum $94,900 $94,900 $94,900 n Contract period to New Day of Sale 5 5 5 t Contract period to Settlement Receipt 5 5 5 Date Property Index Amount (Step 1) Parameter 5 A Initial Share of Property Value $150,000 $150,000 $150,000 B Notional Property Growth Rate 8% 8% 8% D Target Maximum Cost of Funds 12.6825% 12.6825% 12.6825% Formulae (1+B) A n = (1.08) A 5 1.469328 1.469328 1.469328 (1+D) A t =(1.126825) A 5 1.816696 1.816696 1.816696 A $150,000 $150,000 $150,000 x (1+B) ^ n 1.469328 1.469328 1.469328 S Ax (1+B) A n $220,399 $220,399 $220,399 C $94,900 $94,900 $94,900 x (1+D) A t 1.816696 1.816696 1.816696 S Cx (1+D) A t $172,404 $172,404 $172,404 A x (1+B) A n $220,399 $220,399 $220,399 - C x (1+D) A t -$172,404 -$172,404 -$172,404 = .Property.. ndex Amut $47,995$47.......995 Interest Index Amount (SteD 2) Parameter 9 s E Final Share of Property Value $150,000 $191,442 $220,399 F Target Minimum Cost of Funds 8.3000% 8.3000% 8.3000% Formulae (1+F) A t = (1.08300) A5 1.489846 1.489846 1.489846 C $94,900 $94,900 $94,900 x (1+F) At 1.489846 1.489846 1.489846 S Cx (1+F) A t $141,386 $141,386 $141,386 E $150,000 $191,442 $220,399 - C x (1+F) A t -$141,386 -$141,386 -$141,386 s index Amoun$6...... $3 ... ........................................ Maximum Rebate (Step 3) A Initial Share of Property Value $150,000 $150,000 $150,000 C Initial Sum -$94,900 -$94,900 -$94,900 A - C Maximum Rebate$510 $5,0 $510 Early Proceeds Rebate Formula (Step 4) Lesser of: Property Index Amount $47,995 $47,995 $47,995 Interest Index Amount $8,614 $50,056 $79,013 Lesser value = $8,614 $47,995 $47,995 and not more than Maximum Rebate $55,100 $55,100 $55,100 and not less than Nil $0 $0 $0 = Early Proceeds Rebate $8,614 $47,995 $47,995 10 Scenario 2 - Home sold in year 15 Cash Flow amounts assuming value of home increase at: Common Parameters C Initial Sum $94,900 $94,900 $94,900 n Contract period to New Day of Sale 15 15 15 t Contract period to Settlement Receipt 15 15 15 Date Property Index Amount (Step 1) Paramete A Initial Share of Property Value $150,000 $150,000 $150,000 B Notional Property Growth Rate 8% 8% 8% D Target Maximum Cost of Funds 12.6825% 12.6825% 12.6825% Formulae (1+B)A^n =(1.08)A^15 3.172169 3.172169 3.172169 (1+D) ^At = (1.126825) ^ 15 5.995800 5.995800 5.995800 A $150,000 $150,000 $150,000 x (1+B)A^n 3.172169 3.172169 3.172169 = A x(1+B)A^n $475,825 $475,825 $475,825 C $94,900 $94,900 $94,900 x (1+D)A^t 5.995800 5.995800 5.995800 = C x(1+D)A^t $569,001 $569,001 $569,001 A x(1+B) ^An $475,825 $475,825 $475,825 - Cx(1+D)At -$569,001 -$569,001 -$569,001.................................. -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 Interest Index Amount (Step 2) Paramete rs E Final Share of Property Value $311,839 $475,825 $626,587 F Target Minimum Cost of Funds 8.3000% 8.3000% 8.3000% Formulae (1+F) ^ t = (1.08300) ^ 15 3.306922 3.306922 3.306922 C $94,900 $94,900 $94,900 x (1+F) ^ t 3.306922 3.306922 3.306922 S Cx (1+F) t $313,827 $313,827 $313,827 E $311,839 $475,825 $626,587 - C x (1+F) t -$313,827 -$313,827 -$313,827 = InerstIndex Amount -$,8 1199 $1,6 Maximum Rebate (Step 3) A Initial Share of Property Value $150,000 $150,000 $150,000 C Initial Sum -$94,900 -$94,900 -$94,900 A - C Maxium Rebate $510 $510 $5,0 Early Proceeds Rebate Formula (Step 4) Lesser of: Property Index Amount -$93,176 -$93,176 -$93,176 Interest Index Amount -$1,988 $161,999 $312,760 Lesser value = -$93,176 -$93,176 -$93,176 and not more than Maximum Rebate $55,100 $55,100 $55,100 and not less than Nil $0 $0 $0 = Early Proceeds Rebate $0 $0 $0 12 Scenario 3 - Home sold in year 30 Cash Flow amounts assuming value of home increase at: Common Parameters C Initial Sum $94,900 $94,900 $94,900 n Contract period to New Day of Sale 30 30 30 t Contract period to Settlement Receipt 30 30 30 Date Property Index Amount (Step 1) Paramete A Initial Share of Property Value $150,000 $150,000 $150,000 B Notional Property Growth Rate 8% 8% 8% D Target Maximum Cost of Funds 12.6825% 12.6825% 12.6825% Formulae (1+B) ^An = (1.08) A 30 10.062657 10.062657 10.062657 (1+D) ^At = (1.126825) ^ 30 35.949612 35.949612 35.949612 A $150,000 $150,000 $150,000 x (1+B)A^n 10.062657 10.062657 10.062657 = A x(1+B)A^n $1,509,399 $1,509,399 $1,509,399 C $94,900 $94,900 $94,900 x (1+D)A^t 35.949612 35.949612 35.949612 = C x(1+D)A^t $3,411,618 $3,411,618 $3,411,618 A x(1+B) ^An $1,509,399 $1,509,399 $1,509,399 - C x(1+D) ^At -$3,41 1,618 -$3,41 1,618 -$3,41 1,618 = rpet ndex Amnoun $190,20 $1 9220-$,0,2 Interest Index Amount (Step 2) Paramete E Final Share of Property Value $648,291 $1 ,509,399 $2,617,410 F Target Minimum Cost of Funds 8.3000% 8.3000% 8.3000% Formulae (1+F) ^At = (1 .08300) A 30 10.935731 10.935731 10.935731 C $94,900 $94,900 $94,900 x (1+F)A^t 10.935731 10.935731 10.935731 = C x(1+F)A^t $1,037,801 $1,037,801 $1,037,801 E $648,291 $1,509,399 $2,617,410 Maximum Rebate (Step 3) 13 A Initial Share of Property Value $150,000 $150,000 $150,000 C Initial Sum -$94,900 -$94,900 -$94,900 A - C Maiu Rebate $55,100 $55, 100 $55,1 0. Early Proceeds Rebate Formula (Step 4) Lesser of: Property Index Amount -$1 ,902,220 -$1 ,902,220 -$1 ,902,220 Interest Index Amount -$389,510 $471 ,598 $1 ,579,609 Lesser value = -$1 ,902,220 -$1 ,902,220 -$1 ,902,220 and not more than Maximum Rebate $55,100 $55,100 $55,100 and not less than Nil $0 $0 $0 = Early Proceeds Rebate $0 $0 $0 The ability to reduce the amount of the early proceeds rebate based on actual house prices, increases the protection for the purchaser and the investor in the event of a short term decline in house prices. This is because the converse of the aged home owner 5 having a minimum cost of funds on account of the early proceeds rebate is that the investor will have a minimum yield on account of retaining a portion of the initial discount. As can be seen from the following example, the early proceeds rebate provides the purchaser with considerable protection in the event of a decrease in property prices. Approximate Yield to the Purchaser Property price movement 5% 0% -10% -20% Home sold in year Yield Yield Yield Yield %pa %pa %pa %pa 1 4.5 4.5 4.5 4.5 2 6.0 6.0 6.0 6.0 3 6.5 6.5 6.5 6.5 4 7.0 7.0 7.0 4.5 5 7.0 7.0 6.0 3.5 10 * aged home owner assumed to be 75 years old when entering into HELP with a target investor yield of 10.0% p.a. It will thus be apparent that the HELP Product allows aged home owners to convert part of the equity in their home into cash for any purpose. The aged home owner can 14 continue to live in their home as long as they wish and retain all the usual benefits of home ownership. There are no repayments and no rent. The general steps involved in the preferred method of releasing equity in the home are as follows: 1. the aged home owner agrees to sell up to 50% of their home to the purchaser, the 5 maximum limit ensures that the aged home owner keeps a substantial part of their home; 2. the aged home owner receives an initial cash sum which is an advance on what the purchaser expects to receive when the home is eventually sold; 3. the aged home owner determines the timing of the eventual sale which in most 10 instances is expected to be after the aged home owner has died although the aged home owner has the right to sell the property at any time; 4. the aged home owner is not required to make repayments and as such it is not a loan or a "reverse mortgage"; 5. the home is sold and the purchaser is entitled to part of the proceeds from the sale, 15 for example if the aged home owner sold 30% of their home to the purchaser then the purchaser would be entitled to 30% of the proceeds from the eventual sale of the home; 6. the aged home owner receives their share of the actual sale proceeds together with their entitlement to realised excess proceeds and early proceeds rebate (where 20 applicable). If the aged home owner lives longer than their average life expectancy, or the anticipated date of completion, the purchaser must wait longer for the sale of the home and their share of the resultant proceeds. On the other hand if the aged home owner dies in early years of the HELP transaction or decides to sell their home voluntarily, an amount 25 may be paid in addition to the initial cash sum, this being the early proceeds rebate. The HELP Product is designed to be fair to the extent that although the aged home owner has sold a part of their home to the purchaser, it nevertheless allows the aged home owner to share in increases in the market price. This is by way of the realised excess proceeds wherein the purchaser pays the aged home owner or their estate the relevant 30 percentage of any capital growth in excess of the benchmark on the portion owned by the purchaser. Furthermore the HELP Product is designed to protect the financial security of 15 the aged home owner so that if the value of the home does not increase by the benchmark rate, for example 8% per annum, between the time the deposit (or initial cash sum) is paid and the eventual sale of the home, the aged home owner will not be asked to pay anything back. Thus, the purchaser accepts the risk that property prices will not increase by the 5 benchmark rate. The actual cost, or value of the home foregone, to an aged home owner will depend on how long they live and the actual change in the market value of their home. In general terms, the longer an aged home owner lives the lower their cost of funds whereas the higher the actual increase in actual house prices the higher will be the cost of funds. This 10 is exemplified in the preceding scenarios 1 to 3. The aged home owner or vendor will during the life of the HELP Product receive: 1. the deposit or initial cash sum plus $1 on completion; and 2. the early proceeds rebate (if applicable) at completion; and 3. a specified percentage, such as 50% of the realised excess proceeds (if 15 applicable). The amount of the initial cash sum is calculated to provide the purchaser its required yield using the relevant pricing assumptions and traditional actuarial principles. The HELP Product provides for the aged home owner to receive a non-refundable deposit being an initial cash sum which represents the present day value of the HELP 20 Percentage of the expected future sale proceeds which have been sold by the aged home owner. The initial cash sum is a discounted amount relative to the HELP Percentage of the current market value of the home and the difference reflects, in general terms, the required yield of the investor exceeding the assumed house price increase rate as well as other benefits retained by or provided to, the aged home owner. 25 The HELP Product provides for completion on the earlier of the sale of the home or the death of the aged home owner. At completion there is as outlined in the aforementioned examples a final amount payable of $1.00 together with, if applicable, any early proceeds rebate and any share of realised excess proceeds. Generally, the property must be sold within a period of time, for example in 180 days of the aged home owner, 30 which in the case of a couple is defined as the last remaining vendor.

16 The HELP Product may specify the maximum amount of the early proceeds rebate in the event that the home is sold earlier than the anticipated completion date. The HELP Product may also include a method and formula which will apply in certain circumstances to produce a lower amount. The early proceeds rebate is calculated as a percentage of the 5 difference between the market value of the HELP Percentage of the home at inception (or on sale if lower) and the initial cash sum. The early proceeds rebate is paid to ensure that an aged home owner who either decides to voluntarily sell their home or dies before the anticipated completion date is not financially disadvantaged. The HELP Product also provides for a further payment at completion in the event 10 that the actual share of the sale proceeds exceeds a specified benchmark based on the initial value of the home increasing at the benchmark rate such as 4%, 6%, 8% or a margin over an index such as the Consumer Price Index. The aged home owner may typically receive a portion, such as 50%, of the realised excess proceeds. The method of releasing equity involves the transfer of a number of risks including 15 property value, aged home owners longevity or mortality rates, and interest rates. These risks are borne by a pooled entity being the purchaser rather than an individual as is the case with the "reverse mortgage". The vendor or aged home owner is provided with certainty because the purchaser is in a position to average and manage the risks. Notwithstanding that the initial cash sum or deposit is based on a prospective 20 assessment, the early proceeds rebate operates on a retrospective basis. This provides a mechanism to control the cost of funds to the vendor based on an actual sale date and actual sale proceeds. Thus, the vendor has the certainty of sale and the benefit of hindsight in fixing the cost of funds. The HELP Product up until completion contains all ownership rights and obligations 25 for the aged home owner. This includes the ability to lease the home and the requirement to pay all outgoings including rates, taxes and insurance premiums. The aged home owner may buy out the purchaser at any time on the same basis as if the home was being sold. However, this is subject to the amount received by the purchaser being not less than that which would provide the purchaser with its required yield. Otherwise, the method of 30 releasing funds includes the following features: 1. the HELP Product may provide for the deposit or initial cash sum to be paid either by a single lump sum or by instalments, for example, annual instalments over a period of up to 5 years; 17 2. the interests of the purchaser may be protected by a mortgage and a caveat; 3. the HELP Product may provide that on death of the aged home owner the purchaser can complete the purchase of its interest in the home and then be in a position to require the entire home to be sold with the proceeds of sale to be 5 distributed in accordance with the respective ownership interests. Now that a preferred embodiment and various examples of the method of releasing equity in real property have been described, it will be apparent to those skilled in the art that this methodology has at least the following advantages: 1. the home equity lifestyle plan provides the vendor or aged home owners with 10 certainty and security as they are guaranteed to receive a set percentage of the sale proceeds; 2. an additional amount, in the form of an early proceeds rebate, is received by the home owner if the home is sold early or prior to the anticipated completion date; 3. the home owner has both the certainty of sale and the benefit of hindsight in the 15 manner that the cost of funds is determined largely as a result of the early proceeds rebate which operates retrospectively; 4. the process in conjunction with the HELP Product enables aged home owners to access the equity in their homes in a secure and cost-efficient manner; 5. the vendor or home owner can continue to live in their home as long as they wish 20 and retain all the usual benefits of home ownership without repayments and rent; 6. the home owner has the freedom to sell or rent out the home at any time; 7. the home owner continues to benefit proportionally from rises in the value of the home whilst there is no additional cost if on the other hand the value of the home falls; 25 8. the cost of funds reduces the longer the home owner retains ownership of the home; 9. the home owner is provided with security of tenure wherein settlement is delayed until the sale of the home by the aged home owner or their estate after their death; 18 10. the home owner is provided with certainty regarding the maximum percentage of the sale proceeds which will pass to the purchaser who is typically a pooled entity and will be in a position to average and manage its long term risks; 11. the vendor or home owner continues to have the protection of property law as title 5 does not pass to the purchaser until completion; and 12. the HELP Product does not require that the home owner sells and leases back their property in order to release equity in the property. Those skilled in the art will appreciate that the invention described herein is susceptible to variations and modifications other than those specifically described. For 10 example, the methodology need not relate to aged owners' equity in the homes, but rather may extend to other real property and its sale and purchase according to the characterising steps of the invention as broadly defined. The specific percentages and numbers may vary from that described provided the method of releasing equity is within the ambit of the broadest aspect of the invention. 15 All such variations and modifications are to be considered within the scope of the present invention, the nature of which is to be determined from the foregoing description.

Claims (15)

1. A method of releasing equity in real property, said method comprising the steps of: a purchaser paying a vendor a deposit representing a percentage of the purchaser's share of expected future sale proceeds from the property whereby the 5 vendor releases equity in the property; the vendor voluntarily, or their estate after their death, selling the property and the purchaser receiving the specified share of the sale proceeds; and where sale is effected prior to an anticipated date, payment of an early proceeds rebate to the vendor, the early proceeds rebate being a percentage of the 10 difference between the purchaser's share of the market value of the property, and the deposit.

2. A method as defined in claim 1 wherein the anticipated date is determined based on the anticipated life span of the vendor, and the early proceeds rebate is paid when the vendor decides to voluntarily sell their property or dies before this anticipated 15 date.

3. A method as defined in either of claims 1 or 2 wherein the sale of the property further involves payment of excess proceeds where the purchaser's share of the sale proceeds exceeds a benchmark.

4. A method as defined in claim 3 wherein the benchmark is calculated by reference to 20 a benchmark rate which is a percentage per annum compounded.

5. A method as defined in claim 4 wherein the predetermined percentage of the difference between the purchaser's share of the actual sale proceeds and the benchmark which is based on the initial value of the property increasing at the benchmark rate which is set at from between 2 to 10% and the vendor received 25 from between 25 to 75% of the difference between the actual sale proceeds and the benchmark.

6. A method as defined in either of claims 4 or 5 wherein benchmark rate is set at a margin over the Consumer Price Index (CPI). 20

7. A method as defined in any one of the preceding claims wherein the payment of the deposit by the purchaser is not contingent on the vendor repaying the deposit by way of principal and/or interest payments.

8. A method as defined in any one of the preceding claims wherein the percentage of 5 the purchaser's share is calculated based on the present day value of the expected future sale proceeds.

9. A method as defined in claim 8 wherein this percentage represents a discounted amount relative to the purchaser's share of the current market value of the property

10. A method as defined in any one of the preceding claims wherein the purchaser 10 acquires entitlement in the property without transfer of title in the property.

11. A method as defined in any one of the preceding claims wherein the vendor is not required during the term of the contract or on its completion to make payments to the purchaser.

12. A method as defined in any one of the preceding claims wherein the vendor incurs 15 fixed administrative payments on entering into or on completion of the contact although no accruing interest, fees or other charges are payable.

13. A method as defined in any one of the preceding claims wherein the vendor is an aged home owner or aged home owners.

14. A method as defined in claim 13 wherein the aged home owner is at least 65 years 20 of age.

15. A method as defined in any one of the preceding claims wherein the purchaser is a pooled entity including a unit trust or a company.