WO2009036505A1

WO2009036505A1 - Method and apparatus for managing an equity finance arrangement

Info

Publication number: WO2009036505A1
Application number: PCT/AU2008/001383
Authority: WO
Inventors: Andrei Hryshko; Matthew Bell
Original assignee: Greenway Capital Limited
Priority date: 2007-09-18
Filing date: 2008-09-18
Publication date: 2009-03-26

Abstract

Disclosed are methods and apparatus for processing data to assist in the management of financial instruments. These may be utilised for processing data to assist in the management of an equity finance arrangements for property. In particular, methods are disclosed for managing financial instruments when the property that is the subject of the instrument is renovated, when the borrower makes a partial payment, and/or when the borrower makes an additional borrowing. Also disclosed is methods for processing data to assist in the determination of the loan and equity amounts at the termination of an equity finance arrangement.

Description

Method and apparatus for managing an equity finance arrangement

Technical field

The invention relates to the field of financial instruments creating financial arrangements and to methods and apparatus for processing data to assist in the management of financial instruments.

A particular embodiment of the invention relates to methods and apparatus for processing data to assist in the management of an equity finance arrangement for property when the property is renovated during the term of the financial arrangement.

A particular embodiment of the invention relates to methods and apparatus for processing data to assist in the management of an equity finance arrangement for property when a partial payment is made during the term of the financial arrangement.

Another particular embodiment of the invention relates to methods and apparatus for processing data to assist in the management of an equity finance arrangement for property when additional borrowing is made during the term of the financial arrangement.

Another particular embodiment of the invention relates to methods and apparatus for processing data to assist in the determination of the loan and equity amounts at the termination of an equity finance arrangement.

Background

Many derivative markets for property currently exist. Trading in stocks and currencies represent two of the most widely known derivative markets.

Residential housing represents a very large proportion of the national wealth in Australia. According to the Australian Bureau of Statistics (ABS) in

2001 there were over 6.5 million separate and semi-detached houses and townhouses and just under 1 million flats, units or apartments. According to the Housing Industry Association the median dwelling prices for houses and units for the September 2006 quarter were $391 ,300 and $345,100 respectively. This puts the total value of the residential housing stock at over $2.5 trillion.

Many other countries also have a high proportion of the national wealth in residential property. Secured debt finance for residential property has been an important market and equity finance, or finance where in return for a loan, which is typically made to the person who has the right to occupy the property or assign the right to occupy the property, the financier receives a proportion of the increase in value of the property over time, has recently obtained increased significance.

Financing of residential real estate has been available for many years and typically takes the form of a mortgage in which a financial institution will loan a purchaser of real estate a portion of the purchase price of the real estate in a fixed or variable interest rate mortgage arrangement. To qualify for a mortgage the purchaser of the real estate will need to finance a portion of the purchase cost himself and the remaining debt portion provided by the financial institution is repayable to the financial institution over a period of time, typically 20 or 30 years. The outstanding debt, at any time, carries interest, the interest either being a fixed rate or a variable rate.

In more recent years there have been variations to this basic mortgage model which has provided a wider range of financial instruments which a purchaser may use for the financing of the residential property. Such innovations include, for example, interest only mortgages, and "reverse mortgages" which are typically available only to older property owners.

Towards the end of the 20th century, various financial institutions have offered a further mortgage type product, sometimes termed an "equity mortgage" in which a financial institution will loan the purchaser a principal sum backed by the residential property, but that sum will carry no interest and will be repayable at some future point in time. On termination of the loan the financial institution will be repaid the principal sum, together with a predefined proportion of the net increase in the value of the underlying property.

Equity mortgages, as a vehicle for financing residential real estate have many advantages and benefits, but the one of the main advantages is that the borrower of the funds does not need to service the debt during the life of the equity mortgage. Thus, in effect, the owner of the real estate exchanges a portion of the increase in the equity in the real estate for an interest free loan from the financial institution.

This form of equity loan has been described in various publications including a 2003 Australian report published by the Menzies Research Centre entitled: "New Approaches to Reducing the Costs of Homeownership: A Report for the Prime Minister's Homeownership Taskforce", (herein referred to as the Menzies Report). As discussed in the Menzies Report, equity mortgages can assist first time purchasers to access some of the value in their residence without taking on a debt, the regular repayments on which would be unaffordable.

For a typical home owner, the ability to fund the initial purchase, the ongoing ability to finance the mortgage debt associated with the property, and generally the requirement to have liquid funds for investments or to engage in business activity, changes from time to time throughout the term of ownership of their property. For example, many young families, when first buying a property, will have a minimal deposit and a relatively low income, and thus will select a financing vehicle for their real estate purchase which can accommodate their initial low net worth and low income situation. However, a typical family's financial situation will change over time, generally improving as salaries increase with age. Many people at different times during their lives receive lump sum payments or inheritances. Other families may experience a reduced income due, for example, to one of the family members moving out of the employed workforce. Thus, for a myriad of reasons a typical family will experience a change in financial circumstances over time compared to that which pertained at the real estate property was purchased.

Many financial instruments available in the current marketplace are inflexible. In the worst case scenario, a family's changed financial circumstances can result in the family being unable to service a mortgage debt and having their home repossessed. In other situations, for example where a family's financial situation has dramatically improved, the family is locked into a pre-existing mortgage relationship with their financial institution which is costly to break, but yet does not accord with their improved financial circumstances.

In other circumstances, home owners may over time build up a significant equity stake in their property and be desirous of using a portion of that equity to fund, say, a new business venture, or they may wish to diversify their investments rather than having a significant proportion of their net worth locked into their residence.

From the foregoing it will be appreciated that flexibility in mortgage arrangements for real estate is an important issue for many homeowners. It is desirable for many homeowners to have a mortgage arrangement applicable to their residence which can be tailored to more closely mirror their current financial situation. However, it is important to ensure there is stability in the mortgage market and that varying mortgage arrangements do not adversely effect the interests of the financial institution which originally advanced the funds. It is however also important that the real estate owner is not unfairly penalised for changing the mortgage arrangements to better accord with a change in their financial circumstances. While equity finance arrangements have been reported as being of potential utility, to date there has been very limited adoption of such arrangements. Also, there is not currently a derivative market for residential property.

One problem presented by a commercial lender that wishes to enter into equity finance arrangements covering property, is developing a suitable computer system to manage the equity finance arrangements. Included in this management function is a computer system that allows the relative rights of the lender and the occupier of the property to be determined. This information may then be used to value the equity finance arrangement and use this as a basis for trading in a derivative market for such equity finance arrangements.

The market for properties, like most markets, experience periods of volatility and periods of overall decline. The volatility and decline of markets can create hardship for a mortgagor and/or mortgagee. The volatility of an individual property can vary more than the market as a whole.

The Applicant believes that there is a need to develop a useful method for dealing with renovations of a property that is subject to equity finance and a need for a useful method for dealing with the volatility of property values and/or a declining property value that is the subject of a finance arrangement.

One way in which an owner can directly affect the current and future value of a property is to renovate the property. For example, an owner of a residential property may add a further bathroom or expand or modernise a kitchen. When such renovations are carried out when the property is subject to debt finance, the renovations have little affect on the financial arrangement, other than to alter the value of the secured property, which may in some circumstances allow an increase of the mortgage. However, when renovations are carried, out when the property is subject to equity finance, then a problem may arise. If the financier takes a proportion of the increase in value of the property, this increase is likely to be at least partly attributable to the renovations. However, this is not a satisfactory situation for the property owner, as the financier made no contribution to the cost of the renovations, through finance or otherwise.

There therefore remains a need for methods and computational apparatus that facilitate the effective management of equity finance arrangements.

Definitions Throughout this specification, the following terms have the meaning attributed to them in this section.

Equity finance arrangement: A finance arrangement, which may be created by execution of a written financial instrument or otherwise, and which usually has a normal term spanning several years, in which a mortgagee provides funds to a mortgagor in exchange for an equity interest in the underlying property. In consideration for the funds, the mortgagor agrees that the mortgagee is to be entitled to a portion of an increase in value of the property over the term of the arrangement.

Debt finance arrangement: A finance arrangement which may be created by execution of a written financial instrument or otherwise, and which usually has a normal term spanning several years, in which a mortgagee provides funds to a mortgagor secured against an underlying property, the mortgagor paying interest to the mortgagee at either a fixed or variable rate of interest. Mortgagee: The entity providing finance under an equity finance arrangement or a debt finance arrangement.

Mortgagor: The entity receiving finance under an equity finance arrangement or a debt finance arrangement. Base property value: The value of a property that is the subject of an equity finance arrangement at or near the time the equity finance arrangement was created and/or at or near the time the funds were provided by the mortgagee under the equity finance arrangement. The base property value includes a deemed base property that has been adjusted from its original value, for example, as described herein due to a renovation of the property.

Equity loan amount: The value of the funds that were provided or promised to be provided by the mortgagee under the equity finance arrangement at or near the time of creation of the equity finance arrangement.

Loan to value ratio (LVR): The quotient of the equity loan amount when divided by the base property value.

Repayment factor: A value, which is usually but not necessarily constant over the life of an equity finance arrangement, that is multiplied with the LVR to determine the portion of the increase in value of a property, which is subject to the equity finance arrangement, that is owned by the mortgagee.

Mortgagee equity share: The value of the portion of the increase in value of a property from its base property value or its deemed base property value, that is owned by the mortgagee at a particular time under an equity finance arrangement.

Mortgagee equity percentage share: The percentage of the increase in value of a property from its base property value or its deemed base property value, that is owned by the mortgagee at a particular time under an equity finance arrangement.

Current property value: The determined or deemed value of a property at a date when an event that affects the respective rights of a mortgagee and mortgagor to a property that is the subject of an equity finance arrangement occurred or when said respective rights are to be determined. The current value may therefore be a value that is in the past, present, or future, depending on the relation of the date with the date at the time when the computation is made, the terms 'pre-renovation property value' and 'post-renovation property value' mean the current property value before a renovation and after a renovation respectively.

Partial payment date: The date that a partial payment amount was paid, deemed to have been paid, proposed to be paid or agreed to be paid.

Outstanding balance: The sum of the amount to repay the equity loan amount and the value of the mortgagee equity share. Reconciliation date: A date at which the respective rights of a mortgagee and mortgagor to a property that is the subject of an equity finance arrangement are to be determined. This determination may include the determination of an outstanding balance.

Renovation: The result of any activity that changes a property in a way that affects the value of the property.

Summary of the invention

Renovations

According to a first aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre-renovation property value and a post-renovation property value; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes: 1) a modified base property value that is determined dependent on a measure of the percentage difference between the pre-renovation property value and the post-renovation property value;

2) a mortgagee equity share of the property after it has been renovated using as inputs to the computation the equity loan amount, the repayment factor, the modified base property value, and a current value of the property; wherein the data processing means controls the electronic data processing system to output to an interface and/or store in the electronic storage the computed mortgagee equity share of the property.

In one embodiment the modified base property value equals the base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post- renovation value. In an alternative embodiment, the modified base property value is the base property value increased by a modified percentage of the percentage difference between the pre-renovation property value and the post-renovation value.

In one embodiment, the data processing means computes the mortgagee equity share as the product of the difference between the current value of the property and the modified base value of the property and a mortgagee equity percentage share, wherein the mortgagee equity percentage share is computed by the data processing means to be a value that equals the product of the repayment factor and the equity loan amount divided by the modified base value of the property. In one embodiment, the electronic processing system receives, stores or uses the data processing means to compute a measure of movement of the market for the property between the times at which the pre-renovation property value and the post-renovation value were determined, and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property value in the computation of the mortgagee equity share of the property after it has been renovated.

In one embodiment, the electronic storage is a database containing information relating to a portfolio of properties of a mortgagee and an equity finance arrangement for each of the properties, the information including a base property value, an equity loan amount and a repayment factor for each of the properties and further includes a pre-renovation property value and a post-renovation property value for a plurality of the properties, wherein the data processing system is adapted to compute and output and/or store a said mortgagee equity share for any one of the properties, using said modified base property value to compute the mortgagee equity share for any property that has in the database a pre-renovation property value and a post-renovation value for that property. In this embodiment, the data processing system may be further adapted to compute a said mortgagee equity share for a group of the properties and/or all properties in the database.

In one embodiment, the current value of the property as at the reconciliation date is deemed to be the base value if the base value is greater than the actual current value of the property as at the reconciliation date.

According to a second aspect, the invention broadly resides in a method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagor, the method including determining the proportion of the value of the property following the renovation that is attributable to the renovation and crediting the mortgagor with the full value of the same proportion of a future valuation of the property, and splitting the remaining proportion between the mortgagee and the mortgagor according to the terms of the equity finance arrangement. In one embodiment, the method further includes normalising the change in value of the property following renovation by the mortgagor against a change in the market and using the normalised change in the value of the property to determine the proportion of the value of the property following the renovation that is attributable to the renovation.

According to a third aspect, the invention broadly resides in a computer implemented method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has been renovated by the mortgagor, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre- renovation property value and a post-renovation property value; in the data processing system computing a mortgagee equity share of the property, wherein the process of computing includes:

1) computing a modified base property value that is determined dependent on a measure of the percentage difference between the pre- renovation property value and the post-renovation property value; and

2) computing the mortgagee equity share of the property after it has been renovated using as inputs to the computation the equity loan amount, the repayment factor, the modified base property value, and a current value of the property. In one embodiment, the method includes computing the mortgagee equity share as the difference between the current value of the property and the modified base value of the property multiplied by a mortgagee equity percentage share, wherein the mortgagee equity percentage share is determined to be a value that equals the product of the repayment factor and the equity loan amount divided by the modified base value of the property.

In one embodiment the method includes computing the modified base property value as equalling the base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post-renovation value. In an alternative embodiment, the modified base property value is the base property value increased by a modified percentage of the percentage difference between the pre- renovation property value and the post-renovation value. In one embodiment, the method includes computing a measure of movement of the market for the property between the times at which the pre-renovation property value and the post-renovation value were determined and modifies the pre-renovation property by the same proportion as the movement of the market for the property and uses the modified pre- renovation property in the computation of the mortgagee equity share of the property after it has been renovated.

According to a fourth aspect, the invention broadly resides in a method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagee, the method including receiving a valuation of a property before and after the renovation, receiving a measure of the change in value of the property between the valuations that is attributable to a change in the market, computing at least one of the change in value of the property normalised against the change in the market, and using the normalised change in value to determine the proportion of equity ownership between the mortgagee and mortgagor.

According to a fifth aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement for a property between a mortgagee and a mortgagor, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre-renovation property value determined at a first time, a post-renovation value determined at a second time and market information defining a change in a market for the property over a period of time that includes both the time that the pre- renovation property value and the post-renovation value were determined; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes the mortgagee equity share of the property at a time after the time that the post-renovation value was determined, the computation depending on the equity loan amount, the repayment factor and the post renovation value and/or the pre-renovation value varied to attribute for the change in the market for the property between the first and second times.

In one embodiment, there are a plurality of properties in the electronic storage, each of which have pre-renovation values and/or post renovation values determined at different dates and the market information spans the period of time between the earliest and latest dates and wherein the data processing means is adapted to compute the mortgagee equity share for any one of the plurality of properties and/or any group or all of the plurality of properties. According to a sixth aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a mortgagee equity percentage share, a pre- renovation property value and a post-renovation property value; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes:

1 ) a modified base property value that is increased relative to the base property value dependent on a measure of the percentage difference between the pre-renovation property value and the post-renovation property value; 2) a modified mortgagee equity percentage share of the property that is decreased relative to the mortgagee equity percentage share of the property dependent on the measure of the percentage difference between the pre-renovation property value and the post-renovation property value; and 3) a mortgagee equity share of the property as the product of the modified mortgagee equity percentage share with the difference between a current valuation of the property and the modified base property value; wherein the data processing means controls the electronic data processing system to output to an interface and/or store in the electronic storage the computed mortgagee equity share of the property.

In one embodiment, the modified base property value is the original base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post- renovation property value. In one embodiment, the modified mortgagee equity percentage share of the property is decreased by dividing it by the post-renovation property value expressed as a percentage of the pre-renovation property value.

In one embodiment, the data processing means computes or receives a measure of movement of the market for the property between the times at which the pre-renovation property value and the post-renovation value were determined and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property in the computation of the mortgagee equity percentage share of the property after it has been renovated.

According to a seventh aspect, the invention broadly resides in a computer implemented method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagee, the method including: storing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a mortgagee percentage equity share, a pre-renovation property value and a post-renovation property value; and computing from the stored information:

1 ) a modified base property value that is increased relative to the base property value dependent on a measure of the percentage difference between the pre-renovation property value and the post-renovation property value;

2) a modified mortgagee equity share of the property that is decreased relative to the mortgagee equity share of the property dependent on the measure of the percentage difference between the pre-renovation property value and the post-renovation property value;

3) a mortgagee equity share of the property as the product of the modified mortgagee equity percentage share with the difference between a current valuation of the property and the modified base property value; wherein the data processing means controls the electronic data processing system to output to an interface and/or store in the electronic storage the computed mortgagee equity share of the property.

In one embodiment, the modified base property value is the original base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post- renovation property value.

In one embodiment, the modified mortgagee equity percentage share of the property is decreased by dividing it by the post-renovation property value expressed as a percentage of the pre-renovation property value.

In one embodiment, the method includes computing a measure of movement of the market for the property between the times at which the pre-renovation property value and the post-renovation value were determined and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property in the computation of the mortgagee equity percentage share of the property after the property has been renovated.

Partial payments

According to a first aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means, which receives the information relating to the property and the equity finance arrangement from the electronic storage, receives from the electronic storage or from another interface to the data processing system a partial payment amount, a current property value as at the partial payment date, and a current property value as at a reconciliation date that follows the partial payment date, and computes an outstanding balance as at the reconciliation date by, reducing the equity loan amount by the proportion of an outstanding balance of the equity finance arrangement as at the partial payment date that was paid by the partial payment, to result in a deemed equity loan amount and then, using as inputs to the computation the deemed equity loan amount, the current property value as at the reconciliation date and the information relating to the property and the equity finance arrangement; wherein the data processing system stores in the electronic storage and/or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

In one embodiment of the first aspect, the data processing system computes the outstanding balance by reducing the mortgagee's equity percentage share by the same proportion as the reduction in the equity loan amount. In this embodiment, the outstanding balance may be computed so that when viewed as a return on the partial payment, the reduction in the outstanding balance as at the reconciliation date due to the partial payment is constant, regardless of the amount of the partial payment.

According to a second aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means that computes an outstanding balance as at a reconciliation date that follows a date at which a partial payment was made or is deemed to have been made, the computation depending on the information relating to the property and the equity finance arrangement, the partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date, wherein the data processing system computes the outstanding balance so that when viewed as a return on the partial payment, the reduction in the outstanding balance as at the reconciliation date due to the partial payment is constant, regardless of the amount of the partial payment; wherein the data processing system stores in the electronic storage and/or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

According to a third aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a partial payment amount and a current property value as at the partial payment date from the electronic storage, or from another interface to the data processing system and computes an outstanding balance as at a reconciliation date that follows the partial payment date by:

1) receiving from the electronic storage or from an interface to the data processing system a current property value as at the reconciliation date;

2) computing or receiving a modified equity loan amount, wherein the modified equity loan amount is the equity loan amount less the equity loan amount multiplied by the percentage reduction of an outstanding balance as at the partial payment date attributable to the partial payment; and 3) computing the outstanding balance as at the reconciliation date so as to have a value that equals the modified equity loan amount plus a mortgagee equity share, wherein the mortgagee equity share is the difference between the current property value as at the reconciliation date and the base property value, multiplied by a modified mortgagee equity percentage share, and wherein the modified mortgagee equity percentage share is the percentage of the base property value represented by the modified equity loan amount multiplied by the repayment factor; wherein the data processing system stores in the electronic storage or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

In one embodiment of the third aspect, the outstanding balance as at the partial payment date is: the sum of the equity loan amount and the difference between the current property value as at the partial payment date and the base property value, multiplied by the mortgagee equity percentage share, wherein the mortgagee equity percentage share is dependent on the repayment factor and the proportion of the base property value covered by the equity loan amount. The outstanding balance as at the partial payment date may be either received by the data processing means from the electronic storage or from another interface to the data processing system, or computed by the data processing means, the receipt or computation occurring prior to the performance of step 2).

In one embodiment, the current property value as at the partial payment date is deemed to be the base property value if the base property value is greater than the actual current property value as at the partial payment date. Alternatively the current property value may be deemed to be the greater of the base property value increased at a certain rate up to the date of the partial payment and the actual current property value. In one embodiment, the current property value as at the reconciliation date is deemed to be the base property value if the base property value is greater than the actual current property value as at the reconciliation date.

In one embodiment, the electronic storage includes a database containing information relating to a portfolio of properties of a mortgagee and an equity finance arrangement for each of the properties, the information including a said base property value, equity loan amount and repayment factor for each of the properties and further includes a partial payment for a plurality of the properties, wherein the data processing system is adapted to compute and output and/or store a said outstanding balance as at a said reconciliation date for any one of the properties. In this embodiment, the data processing system may be further adapted to compute a said mortgagee equity share and/or a said outstanding balance as at the reconciliation date for a group of the properties and/or all properties in the database.

In one embodiment, the current property value as at the date of the partial payment and/or as at the reconciliation date is determined based on market data. In this embodiment, the electronic storage may include information defining movement in the market for the property over time and this information and the base property value is used by the data processing system to determine the current property value.

According to a fourth aspect, the invention broadly resides in a method of managing an equity finance arrangement between a mortgagee and a mortgagor when a partial payment is made by the mortgagor during the term of the equity finance arrangement, the method including determining the proportion of an outstanding balance of the equity finance arrangement that is paid by the partial payment, and dependent on that proportion: reducing an equity loan amount of the equity finance arrangement to a deemed equity loan amount; and reducing a current mortgagee's equity percentage share under the equity finance arrangement. In one embodiment of the fourth aspect, the equity loan amount and the current mortgagee's equity percentage share are both reduced by the same proportion as the proportion of an outstanding balance of the equity finance arrangement that is paid by the partial payment. According to a fifth aspect, the invention broadly resides in a computer implemented method of determining the outstanding balance of an equity finance arrangement at a reconciliation date, when a partial payment has been made by the mortgagor before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, information defining a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing means computing the outstanding balance as at the reconciliation date and outputting the computed outstanding balance, wherein the process of computing includes reducing the equity loan amount by the proportion of an outstanding balance of the equity finance arrangement as at the partial payment date that was paid by the partial payment, to result in a deemed equity loan amount and then, using as inputs to the computation the deemed equity loan amount, the current property value as at the reconciliation date and the information relating to the property and the equity finance arrangement. According to a sixth aspect, the invention ' broadly resides in a computer implemented method of determining an outstanding balance of an equity finance arrangement at a reconciliation date when a partial payment has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, information defining a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing system using said information to compute and output the outstanding balance as at the reconciliation date so that the reduction in the outstanding balance as at the reconciliation date caused by the partial payment, viewed as a return on the partial payment, is constant regardless of the amount of the partial payment. According to a seventh aspect, the invention broadly resides in a computer implemented method of determining the outstanding balance of equity finance arrangement at a reconciliation date when a partial payment has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing system computing an outstanding balance as at the reconciliation date and outputting the computed outstanding balance, wherein the process of computing includes: computing a modified equity loan amount, wherein the modified equity loan amount is the equity loan amount less the equity loan amount multiplied by the percentage reduction of an outstanding balance as at the partial payment date that is attributable to the partial payment; and computing the outstanding balance as at the reconciliation date so as to have a value that equals the modified equity loan amount plus a mortgagee equity share, wherein the mortgagee equity share is the difference between the current property value as at the reconciliation date and the base property value, multiplied by a modified mortgagee equity percentage share, and wherein the modified mortgagee equity percentage share is the percentage of the base property value represented by the modified equity loan amount multiplied by the repayment factor. In one embodiment of the seventh aspect, the outstanding balance as at the partial payment date is the sum of the equity loan amount and the difference between the current property value as at the partial payment date and the base property value, multiplied by the mortgagee equity percentage share, wherein the mortgagee equity percentage share is dependent on the repayment factor and the proportion of the base property value covered by the equity loan amount.

Additional borrowing

According to a first aspect, the invention broadly resides in a computer implemented method of determining an outstanding balance of an equity finance arrangement for a property at a reconciliation date when an additional borrowing has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including; creating an additional equity finance arrangement relating to the additional borrowing, the additional equity finance arrangement determined to have a mortgagee's equity percentage share that is dependent on the amount of the additional borrowing relative to a current value of the property when the additional borrowing was made; computing an outstanding balance as a sum of the outstanding balances of the equity finance arrangement and the additional equity finance arrangement.

According to a second aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means, which receives the information relating to the property and the equity finance arrangement from the electronic storage, receives from the electronic storage or from another interface to the data processing system an additional borrowing amount, a current property value as at the additional borrowing date, and a current property value as at a reconciliation date that follows the additional borrowing date, and computes an outstanding balance as at the reconciliation date by creating an additional equity finance arrangement relating to the additional borrowing, the additional equity finance arrangement determined to have a mortgagee's equity percentage share that is dependent on the amount of the additional borrowing relative to a current value of the property when the additional borrowing was made and computing an outstanding balance as a sum of the outstanding balances of the equity finance arrangement and the additional equity finance arrangement.

Combined equity and debt finance management

According to a first aspect, the invention broadly resides in a method of managing a portfolio of loan arrangements over a property, the method including storing in electronic storage data relating to and defining an equity finance arrangement and a debt finance arrangement relating to the property, the method further including increasing the loan amount of the debt finance arrangement and applying at least a portion of the increase in the loan amount of the debt finance arrangement as a partial payment of the equity finance arrangement.

In one embodiment, the step of applying at least a portion of the increase in the loan amount of the debt finance arrangement as a partial payment of the equity finance arrangement includes applying the method of managing an equity finance arrangement between a mortgagee and a mortgagor when a partial payment is made by the mortgagor during the term of the equity finance arrangement as described in the preceding paragraphs.

According to a second aspect, the invention broadly resides in a method of managing a portfolio of loan arrangements over a property, the method including storing in electronic storage data relating to and defining an equity finance arrangement and a debt finance arrangement relating to the property, the method further including creating a further equity finance arrangement over the property and applying at least a portion of an equity loan amount provided under the further equity finance arrangement to decrease the loan amount of the debt finance arrangement.

In one embodiment, the step of creating a further equity finance arrangement over the property includes treating the equity loan amount as an additional borrowing in the method of determining an outstanding balance of an equity finance arrangement for a property at a reconciliation date when an additional borrowing has been made by a mortgagor of the equity finance arrangement before the reconciliation date described in the preceding paragraphs.

Loan termination

According to a first aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information defining a base property value, an equity loan amount and at least one of a mortgagee's equity percentage share and a repayment factor that defines a mortgagee's equity percentage share; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a current value of the property that is higher than the base property value and computes an outstanding balance by: if the current value of the property has increased by more than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between the ceiling amount and the base property value and the mortgagee's equity percentage share; if the current value of the property has increased less than a ceiling amount, then computing the outstanding balance, as the sum of the equity loan amount and the product of the difference between the current value of the property and the base property value and the mortgagee's equity percentage share.

According to a second aspect, the invention broadly resides in an electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information defining a base property value, an equity loan amount and at least one of a mortgagee's equity percentage share and a repayment factor that defines a mortgagee's equity percentage share; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a current value of the property that is less than the base property value and computes an outstanding balance by: » if the current value of the property is higher than the equity loan amount, then determining the outstanding balance to be equal to the equity loan amount; if the current value of the property is lower than the equity loan amount, then determining the outstanding balance to be equal to the current value of the property. According to a third aspect, the invention broadly resides in a computer implemented method of determining the outstanding balance between a mortgagee and a mortgagor in an equity finance arrangement that includes an equity loan amount provided by the mortgagee to the mortgagor which represents a percentage of a base property value of the property that is the subject of the equity finance arrangement, the method including receiving a current value of the property and computing the outstanding balance by: if the current value of the property has increased by more than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between the ceiling amount and the base property value and a mortgagee's equity percentage share; and if the current value of the property has increased less than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between current value of the property and the base property value and a mortgagee's equity percentage share; and/or if the current value of the property has decreased below the base property value but is higher than the equity loan amount, then determining the outstanding balance to be equal to the equity loan amount; and if the current value of the property has decreased below the base property value and is lower than the equity loan amount, then determining the outstanding balance to be equal to the current value of the property. Part Debt Loan Part Equity Loan

A yet further aspect of the invention provides method for determining a repayment amount which a mortgagor must repay to a mortgagee for a total loan amount secured against a real estate property, the method including the steps of: establishing a loan facility for the total loan amount repayable after a period of time has elapsed, or on the occurrence of a specified event, said loan facility comprising a debt loan amount and an equity loan amount, said amounts initially being in the ratio of between 0% and 1.00% of each other; allowing a mortgagor during the existence of the loan facility to vary the ratio of the debt and equity loan amounts relative to each other at least once; and on termination of the loan, determining the amount to be repaid to the mortgagee by summing the unpaid dept portion, the unpaid equity portion, and the sum of the increased value portions.

In one embodiment, the method further includes during the existence of the loan facility, determining one or more sub-periods during which the mortgagor had an equity loan amount and the period for which the equity loan amount was in existence; receiving regular payments from the mortgagor in respect of interest on the debt loan amount; and allocating to the mortgagee an increased value portion which is based on a proportion of the increase in the value of the real estate over the or each sub-period relative to the value of the equity portion during that period.

Further, the invention provides a method for determining the equity interest which a mortgagee has in a real estate property obtained in respect of an equity loan secured by a borrower against the property, the method including the steps of: establishing a loan facility in favour of the mortgagor; allowing the mortgagor to make an initial equity loan against the loan facility thereby providing the mortgagee with an equity interest in the real estate; allowing the mortgagor to vary the quantum of the equity loan from time to time to thereby create a series of sequential equity loans of varying amounts, each being in existence for a sub period of the^: loan; establishing the value of the real estate at the start and end of each of said sub period; varying the portion of equity interest in the real estate that the mortgagee has at the start of each sub period depending at least in part on the change of value of the real estate property; and establishing on termination of the loan the equity interest that the mortgagee has in the real estate.

Further there is provided for the loan facility to comprise a combination of a debt loan and an equity loan, and for the borrower to vary the quantum of the equity loan by increasing or decreasing the quantum of the debt loan, and providing a corresponding decrease or increase in the quantum of the equity loan.

Further there is provided for the loan facility to comprise a combination of a debt loan and an equity loan, and for the borrower to vary the quantum of the debt loan by increasing or decreasing the quantum of the equity loan, and providing a corresponding decrease or increase in the quantum of the debt loan.

Further there is provided for the step of establishing the value of the real estate at the start and end of each of sub-period to be established by estimation based on an index reflective of the change in value of real estate of a similar nature during the relevant periods. Alternatively, one or both of the valuations may be established by a specific valuation of the relevant property on or about the relevant date.

Further aspects and embodiments ^: Any one of the aspects or embodiments of the invention described in the preceding paragraphs or elsewhere in the specification may be applied to a derivative market. The invention may have particular utility where the property that is the subject of the derivative market is residential housing. The preceding paragraphs describe particular embodiments of the invention, that may be implemented alone or in any combination that is of utility.

Further aspects of the present invention and further embodiments of the aspects described in the preceding paragraphs will become apparent from the following description, given by way of example and with reference to the accompanying drawings.

Brief description of the drawings

Figure 1 : shows a data processing system in which the present invention may be implemented.

Figure 2: shows an example of contents of the database from the data processing system of Figure 1.

Figure 3: shows more detail of the portfolio data shown in Figure 2 that relates to a property renovation. Figure 4: shows a flow chart of a method that may be performed in accordance with an embodiment of the present invention when a property is renovated.

Figure 5: shows a flow chart of a method of normalising a change in property values before and after a renovation. Figure 6: shows more detail of the portfolio data shown in Figure

2 that relates to a partial payment.

Figure 7: shows a flow chart of a method that may be performed in accordance with an embodiment of the present invention when a partial payment is made. Figures 8-10: show tables demonstrating the effect of different partial payments as determined by the apparatus and method of an embodiment of the present invention, for three different property values as at a reconciliation date. Figures 11-12: show tables demonstrating the effect of a partial payment for different values of property as at the date of partial payment, as determined by the apparatus and method of an embodiment of the present invention, for two different property values as at a reconciliation date. Figure 13: shows a table demonstrating the effect of placing a minimum deemed outstanding balance equal to the equity loan amount as at a partial payment date.

Figure 14: shows a flow chart of a method that may be performed in accordance with an embodiment of the present invention when an additional borrowing is made.

Figure 15: shows a table with an example of an application and implementation of an additional borrowing during the term of an equity finance arrangement.

Figure 16: shows an example of an equity finance arrangement maintained by a data processing system when an additional borrowing is made after a renovation.

Figure 17: shows an example of an equity finance arrangement maintained by a data processing system when an additional borrowing is before a renovation. Figure 18: shows a flow chart of a method for determining a cap and floor that may be applied to an equity finance arrangement according to an embodiment of the present invention.

Figure 19: illustrates the effect of applying the floors and caps determined in accordance with the method illustrated in Figure 18 for a property over a range of current values for the property.

Figure 20: shows the difference to Figure 19 caused by increasing the margin at which a cap is applied.

Figure 21 : shows the difference to Figure 19 caused by a different value for the movement of the market for the property. Detailed description

The invention will now be described by way of example with reference to property in the form of residential property and one aspect of the invention is the application of the methods and data processing systems described herein to equity finance arrangements covering residential property. However, the equity finance arrangement may relate to other property, which may be real property, personal property and/or intangible property.

Exemplary data processing environment Figure 1 is a diagram of a data processing system 1 that may implement the present invention. The description of the data processing system 1 is given by way of example of a possible operating environment for the method of the present invention and as an example of embodiments of the apparatus of the present invention. Those skilled in the relevant arts will appreciate that the invention will have application to other data processing systems.

The data processing system 1 is in the form of a corporate computer network, including an Ethernet connecting terminals in the form of personal computers 2, a server 3, and other network devices and/or connections to other networks, for example the internet. The server 3 operates as a database management server for a database 4. In the following description it is assumed that the personal computers 2 each perform the processing functions of the present invention and that data is requested from the server 3 as required to complete those functions. However, the processing operations could equally be performed elsewhere, for example by the server 3, or by another server, either operating as a separate server process in the same physical device as server 3, or on a separate physical server device.

Each personal computer 2 includes a user interface that incudes a keyboard 5 and a display 6. Data input and analysis functions may be controlled by an operator using the user interface, and reports may be displayed on the display 6. The reports may be stored in fixed or removable electronic storage, locally to the computer 2 or centrally, printed, and/or communicated to other devices within or outside of the data processing system 1.

Database contents Figure 2 shows diagrammatically the contents of the database 4.

Although the database 4 is represented in Figures 1 and 2 as a single device, the information could be distributed across a plurality of storage devices, which collectively form the electronic storage of the data processing system 1 that holds the data shown in Figure 2. It is expected that the information would also be backed up in another storage device located geographically separated from the database 4. However, for clarity of explanation, a simplified example is provided in which a single database is used.

The information stored in the database 4 is used for two purposes, a market analysis function, which determines the movement of the market for a property over time, and a property management function, which determines the respective rights in the property by a mortgagee and mortgagor.

(1) Information for the market analysis function One method of market analysis that may be used to implement embodiments of the present invention is a method described in the Applicant's co-pending Australian patent application number 2007905090 entitled 'Apparatus and method for property portfolio management' and the Applicant's international patent application of the same title filed on the same date as the present application, the contents of which are incorporated herein by reference.

The database 4 stores market data 40, which defines aspects of the residential property market. A selection of information that may be used in the analysis described in the Applicant's co-pending Australian patent application is provided in Figure 2, but as described in the Applicant's co- pending application, additional information may be used. The market data 40 may include: 1 ) A listing of property identifiers 41 , which uniquely identify, at least for the purposes of the database 4, each property. In Figure 2 a single property, 'Property A' is shown. The database 4 will include a number of properties. 2) Location information 42 for each property identifier 41. For example, the location information may specify that Property A is located in a particular suburb.

3) Initial sale data 43 and final sale data 44, both of which include the sale price and date. In the example, Property A was sold for $450,000 in May 2005 and then sold again in July 2007 for $480,000. The date of the sales and the times between the sales will vary from property to property.

The data may be filtered prior to use in the analysis of the market to remove errors and/or transactions that are outside the normal market conditions, and may be performed automatically, manually, or using a combination of both.

The database 4 may in addition, or instead contain information defining changes in the property market(s) relevant to the properties in the portfolio over time. In the embodiment described herein, it is assumed that the market change data 50 is computed from the market data 40. It may then be computed and stored for future access, or computed in real time as required by an analysis function (see herein below). In alternative embodiments, the market change data 50 may be received from another source instead of computed in the data processing system 1.

This market change data 50 may be separated by location and/or by other variables to increase the accuracy of the model for particular types of property. For example, different models may be formed for units and houses and/or different models formed depending on the number of bedrooms, bathrooms, whether there is a desirable view etc. ^:

In Figure 2, it is assumed that there are separate models for each location, which may be defined by street, suburb, state or otherwise, and for units and houses within each location. The models are formed over time so that the market change in an area for a house and a unit between any two points of time during the currency of the models can be determined.

(2) Information for the property management function Portfolio data 60, which is information relating to the properties of interest and the equity finance arrangement for those properties is stored in the database 4. More details regarding the information forming the portfolio data are described herein below.

By way of example, the database 4 may store information on each of the properties that a single mortgagee has entered into an equity finance arrangement with a mortgagor. The database 4 may therefore contain information on a few properties, or hundreds or thousands of properties, depending on the size of the operations of the mortgagee. For larger databases, the properties may be separated into classes, for example by office, state and/or country, allowing, local, regional, national and/or global report generation and analysis.

For each property, the following information may be stored in the database 4: a property identifier that uniquely identifies the property at least in the database 4, a property location indicating the region or area in which the property is located, for use in determining the market change for properties in that region, a base property value, an equity loan amount and a repayment factor. While the equity loan amount is typically a single amount paid or agreed to be paid, it could be a series of payments or a future payment. The current equivalent value using an appropriate selected discount rate could be used to determine a value for the equity loan amount that has a component payable in the future. A maximum equity loan amount viewed as a percentage of the base property value (i.e. a maximum LVR), may be imposed so as to ensure that the mortgagor receives at least some of the benefit of an increase in the value of the property. In other embodiments other variables, such as the value of the repayment factor, may be varied to ensure that the mortgagor obtains some benefit from an increase in the value of the property.

This information may be entered at one of the personal computers 2 using a suitable interface, for example a graphical user interface provided by proprietary software developed to present on screen the relevant fields to be entered by an operator. In addition, there is provision for the entry and storage of one or more partial payments and their partial payment dates, together with the current property value as at each of the partial payment dates. Portfolio management and data analysis - renovations

Figure 4 shows a computational process that is performed in the data processing system 1 in accordance with an embodiment of the invention which deals with renovation of a property. As previously explained, the process may be controlled by a personal computer 2, which requests the data required from the database 4 from the server 3. Those skilled in the relevant arts will be able to form instructions for the personal computer 2 to perform the processes described herein using a standard personal computer including a processor, associated memory, communication buses and a network interface and the preferred embodiment presently contemplated uses a programmed personal computer 2.

In step 100, the database 4 is formed. Initial information 150 is input at one of more of the personal computers 2, for example using a keyboard, accessing a web-site that contains or has a link to the required information, or copying the information from a removable storage device. The initial information includes at least an initial set of portfolio data that defines properties and the equity finance arrangement for each property, and an initial set of market data, which defines the market so that changes in the market for the properties can be determined. The portfolio data and market data have been explained in more detail in relation to Figures 2 and 3. Over time, the portfolio of properties will change, for example as new properties enter equity finance arrangements with the mortgagee, existing equity finance arrangements are terminated, the mortgagee acquires the equity finance arrangements of another mortgagee and properties within the portfolio are renovated. Change information 151 defining these changes is entered in step 101. Step 101 is therefore an ongoing process, which may be performed periodically, for example on a monthly basis. Information on the changes to the portfolio are entered at a personal computer 2 and stored in the database 4 as they occur. In addition, news market data will be received, for example data on sales of properties in particular areas and/or information more directly defining the change in the relevant property market(s). This information is also entered into the database 4.

In step 102, the percentage change (or another equivalent measure) of the value of a property due to a renovation is determined. For example, property A from Figure 3 was subject to a renovation in 2007. A valuation of the property as at 1 April 2007, before the renovation (pre-renovation value) was $1 ,500,000, and a valuation of the property as at 12 October 2007, following completion of the renovation (post-renovation value) was $1 ,650,000. Therefore, the percentage change is 10%. In one embodiment, this value is used in step 103. In this embodiment, the market data 40 and market movement data 50 is not required. In another embodiment, the percentage change in valuation is normalised for changes in the market between the date of the pre- renovation valuation and the post-renovation valuation. An advantage of this is that the mortgagee is not deprived of the benefit of any increase in value of the property during the term between the pre-renovation valuation and the post-renovation valuation. This process is represented in Figure 5 and includes in step 102a computing the actual percentage change in valuations, which is 10% in this example. In step 102b the change in the market between the valuation dates, in this example between 1 April and 12 October 2007, is determined. In one embodiment, the change in the market is determined from the market data 40. In particular, the repeat sales information may be used as described in the Applicant's co-pending Australian patent application entitled 'Apparatus and method for property portfolio management' filed on the same date as the present application, to determine a change in the market over time, with new data being entered as properties are sold to create an evolving model of the market over time.

Other methods of determining the change in the market of a property may be used in embodiments of the present invention. These methods may include, for example, using changes in the median house price and/or unit price, or using regression based approaches such as hedonic measures and other repeat-sales measures. If information is available only for a larger period of time, for example a year that includes the period 1 April to 12 October 2007, then the change over that year may be divided by the portion of the year occupied by the time delay between the pre-renovation and post- renovation valuations. The method preferably involves using a model of the market that most closely reflects the property that has been renovated. For example, if the property was a house in a particular location, then preferably a model is formed or used that is specific to houses in that location.

As an example, the market for the Property A may have increased by 6.28% for the year including the pre-renovation and post-renovation valuation dates, which means that a 3.33% increase can be attributed to the period 1 April to 12 October 2007. Therefore, the market is assumed to have added 3.33% of 1 ,500,000 or approximately $50,000 to the value of the property. This amount is added to the pre-renovation value to make it $1 ,550,000. If the market dropped by 3.33%, then $50,000 would be subtracted from the pre-renovation value to make it $1 ,450,000.

In other embodiments, the model may form a continuous scale of changes in the market over time, in which case the change during the period 1 April to 12 October 2007 could be determined directly from this model. In step 102c, the normalised percentage change in value of the property is determined. In the 3.33% rising market example this is 6.45% and for the 3.33% falling market example this is 13.8%. This percentage is used in step 103 (see Figure 4).

In step 103, the percentage change in the valuations before and after the renovation are used to compute a modified base property value. This same percentage change is applied to the base property value to determine a modified or deemed base property value. The percentage change in the valuations before and after the renovation are in one embodiment normalised against changes in the market during the renovation period.

In one embodiment, the modified base property value is the base valuation varied by the same percentage variation as the percentage change in the property between the pre-renovation and post-renovation valuations, using either the actual or normalised valuations depending the particular embodiment. In an alternative embodiment, the percentage change may be modified. For example, it may be determined that the percentage change is reduced or increased by a certain amount, for example 10%, so that a 10% change in value is deemed to be a 9% or 11% change respectively. This modification may be used if it is determined that, on average, in the long term the contribution of a renovation to the value of a property is different to its short term effect. In some embodiment, the modification to the percentage change may be dynamic, depending on other factors, for example the remaining term before the equity finance arrangement terminates.

In step 104, a new loan to value ratio (LVR) is computed. The new LVR is the quotient of the equity loan amount divided by the modified base property value. Assuming that the modified base property value is $1 ,100,000 in the example (a 10% increase), then:the new LVR is 18.18%.

In step 105, the modified mortgagee equity percentage share is computed and stored. The modified mortgagee equity percentage share is the product of the new LVR and the repayment factor. In the example the repayment factor is 1.75 and therefore the modified mortgagee equity percentage share is 31.82%. The original mortgagee equity percentage share was 35%, which is 110% of the modified mortgagee equity percentage share. The modified mortgagee equity percentage share may therefore be computed using this relation.

The value of the equity ownership of the mortgagee and mortgagor can then be readily computed for a current valuation, which is received in step 106. In step 107 the mortgagee equity share is the product of the mortgagee equity percentage share multiplied by the current value less the modified base property value. If the current value is $3, 300;000, representing double the value at the time of the post-renovation valuation (which may have resulted from approximately 7.2% growth per year for ten years, in which case the current value would be a valuation in 2017), then the mortgagee's equity share would be $700,000, which is the current value less the modified base property value multiplied by the modified mortgagee equity percentage share. The mortgagor's equity is the remaining $2,400,000 and the outstanding balance is $900,000.

If the mortgagor had not performed the renovations, then under the assumptions of one embodiment, the property would have still doubled in value so as have a current valuation of $3,000,000. Performing the same computations using the original base property value and mortgagee equity percentage share, the mortgagor's equity would be $2,100,000. This is $300,000 less than if the renovations had been made, which is double the change in the pre-renovation and post-renovation values. The mortgagor has therefore retained all of the value added by the renovation and any growth on that value going forward. As illustrated by the example Property C in Figure 3, a single property may undergo two or more renovations during the term of an equity finance arrangement. In this case, information relating to both renovations is entered into the database 4 and both are considered when determining the equity ownership of the mortgagee and mortgagor based on a current valuation. This is achieved by further modifying the base property value by the percentage change (or normalised or modified of normalised and modified percentage change) between the value of the property before the second renovation and after the second renovation. The further modification uses the same computations as for the first modification described above. The mortgagor therefore can retain all of the value added by both renovations and any growth on that value going forward.

In addition, further variations to the equity loan amount and/or the mortgagee equity percentage share may be made during the course of the equity finance arrangement. For example, the mortgagor may make a partial payment to the mortgagee and that partial payment may affect both the equity loan amount and the mortgagee equity percentage share for the purposes of determining a final outstanding balance at a future reconciliation date. A method for dealing with partial payments is described herein below.

Portfolio management and data analysis - partial payments

The database 4 may store details regarding partial payments made during the term of the equity finance arrangement, the details including the partial payment amount and at least one of a partial payment date and a current property value as at the partial payment date. Example values for properties in a portfolio are shown in Figure 6. Alternatively, the database may store values that are calculated dependent on the partial payment amount and valuation of the property as at the partial payment date, the values being described herein below.

Figure 7 shows a computational process that is performed in the data processing system 1 in accordance with an embodiment of the invention to determine the outstanding balance of an equity finance arrangement when a partial payment has been made during the term of the arrangement.

In step 200, the database 4 is formed and initial information 250 is input in a similar manner as described in relation to Figure 4 and change information 251 is input (step 201) in the same way as the change information 151 (see Figure 4), including partial payments as they are made by the mortgagor or the mortgagor borrows more under the equity finance arrangement (see herein below). In step 202, the outstanding balance owed to the mortgagee as at the partial payment date before the partial payment is taken into account is computed. This value is the sum of the mortgagee equity share and the equity loan amount. The mortgagee equity share is the product of the LVR, repayment factor and difference between the current property value and the base property value. Taking for example Property A shown in Figure 3, the equity loan amount is 200,000, the LVR is 20%, the repayment factor is 1.75 and the difference between the current property value and the base property value is 500,000. This results in an outstanding balance of $375,000. In step 203 a modified equity loan amount is computed to reflect the partial payment. This value equals the product of the current equity loan amount, which is $200,000, and (1 - proportion of the outstanding balance paid by the partial payment). Again taking property A, the partial payment is 120,000 and the proportion of the outstanding balance paid by the partial payment is $120,000/$375,000, which results in a modified equity loan amount of $136,000.

In step 204, a modified LVR is computed as the quotient of the modified equity loan amount and the base property value, which for Property A is 13.60%. A modified mortgagee equity percentage share is then computed in step 105 as the product of the modified LVR and the repayment factor, which results in a modified mortgagee equity percentage share of 23.80%. Accordingly the partial payment has resulted in both a reduction in the equity loan amount and a reduction in the mortgagee equity percentage share. These values are then used to determine the outstanding balance at a future reconciliation date, together with a current property value as at the reconciliation date. This process is represented in Figure 5 by steps 206 and 207.

In step 206, the current property value as at the reconciliation date is retrieved from the database 4, or entered at an interface to the data processing system. For Property A, this value is $2,000,000. The mortgagee equity share is computed as the product of the difference of this value from the base property value and the modified mortgagee equity percentage share.

In step 207, the outstanding balance is computed as the sum of the mortgagee equity share computed in step 206 with the modified equity loan amount computed in step 203.

In one embodiment, the current valuation of the property as at the partial payment date is determined based on the base property value of the property or a later valuation by a recognised valuer or otherwise, and the change in the market is determined from the market data 40. In particular, the repeat sales information may be used as described in the Applicant's co- pending Australian patent application entitled 'Apparatus and method for property portfolio management' filed on the same date as the present application, to determine a change in the market over time, with new data being entered as properties are sold to create an evolving model of the market over time. An advantage of this embodiment is that neither the mortgagor nor the mortgagee needs to obtain a formal valuation to make a partial payment. However, in alternative embodiments, the method may involve receiving a valuation from a valuer, rather than computing a valuation based on the change in the market. Other methods of determining the change in the market of a property may be used in embodiments of the present invention. These methods may include, for example, using changes in the median house price and/or unit price, or using regression based approaches such as hedonic measures and other repeat-sales measures. The change in the market may also represent an average of a plurality of different ,measures of market movement over time.

When the value is determined based on market information, the method may involve using a model of the market that most closely reflects the property for which a partial payment has been made. For example, if the property was a house in a particular location, then a model is formed or used that is specific to houses in that location. In the embodiment described herein above, the modified equity loan amount is the equity loan amount varied by the same percentage that the partial payment paid the outstanding balance owed to the mortgagee. In an alternative embodiment, the percentage change in the modified equity loan amount may be modified. For example, it may be determined that the percentage change is reduced or increased by a certain amount, for example 10% so that a 10% change in value is deemed to be a 9% or 11% change respectively. This modification may be used for example, as a penalty for making partial payments or as an incentive to make partial payments. For example, a penalty may apply if a partial payment is made within the first 3 years of a 15 year equity finance arrangement.

In some embodiments, the modification to the percentage change may be dynamic, depending on market or other factors in order to provide a penalty or incentive to make partial payments. For example one factor may be whether the mortgagee wishes to manage its portfolio to reduce or increase the amount loaned to its mortgagors. In alternative embodiments, the penalty or incentive could be determined using other computations or by setting the penalty or incentive at a fixed amount. However, for at least any penalty, the penalty is preferably charged only against the component of the partial payment that is applied to the equity loan amount, not the component that is applied to reduce the mortgagee equity percentage share and consequently the mortgagee equity share component. This avoids the penalty effectively increasing with the value of the property.

If the mortgagor had not performed the partial payment, then performing the same computations using the original base property value and mortgagee equity percentage share, the outstanding balance would be

$550,000. This is $176,000 more than in comparison to the situation where a $120,000 partial payment was made when the property was valued at

$1 ,500,000. The mortgagor has therefore received a net-benefit of $56,000 from making the partial payment. Figure 8 shows a spreadsheet for the example of Property A for a range of partial payment values from a zero partial payment through to a full payment in $15,000 increments. The characteristics of the equity finance arrangement are listed across the top of the table headed 'Current effect of partial payment', which includes the information described as stored in the database for Property A in relation to Figure 6 and the calculations of the LVR, mortgagee equity share, outstanding balance and mortgagee percentage equity share described in relation to Figure 7.

Below these fields are the range of partial payments from $0 to $375,000, or 0% to 100% payment, and effects on the current state of the equity finance arrangement due to that partial payment. The effects include a reduction in the equity loan amount, LVR, mortgagee equity share, outstanding balance and mortgagee equity share for any non-zero partial payment. All of these values reduce linearly for the linear increase in partial payment.

The table headed 'Future effect of partial payment' in Figure 8 shows the effect of the partial payment at a reconciliation date following the partial payment when the property is valued at $2,000,000. This table shows the reduction in the mortgagee's equity share in the property and the reduction in the future outstanding balance for the range of partial payments.

The table also shows the difference to the future outstanding balance caused by the partial payment, which is the difference between the future outstanding balance if no partial payment was made, which is $550,000 in this example, and the future outstanding balance with the partial payment. This difference to the future outstanding balance is constant at 147% of the partial payment. Accordingly, putting aside any additional fees that the mortgagee may apply under the equity finance arrangement, the mortgagor is not penalised for making smaller or larger partial payments.

Figure 9 shows the same spreadsheet as Figure 8 except that the value of the property as at the reconciliation date has been reduced to

$1 ,500,000, which is the same value of the property as at the prepayment date. At this level the return of the partial payment is 100%, reflecting that there has been no growth (or reduction) in the mortgagee's equity share due to the static value of the property since the partial payment.

Figure 10 shows a situation where the value of the property as at the reconciliation date has fallen below the value of the property as at the date of the partial payment. In this case, the mortgagor makes a loss on its partial payment, obtaining only 53% of its value as at the reconciliation date, reflecting the fall in value of the mortgagor's investment in the property.

Figures 11 and 12 show spreadsheets indicating the effect of a partial payment at different current values of the property and the effect of this at a future reconciliation date for two different property values. In this example, a partial payment of $120,000 is applied to an equity finance arrangement with a $200,000 equity loan amount at an LVR of 20% and a repayment factor of 1.75. The current effect of the $120,000 partial payment is shown for a range of current property values below and above the base value of the property.

It can be seen from Figures 11 and 12 that, unless the provisions of the equity finance arrangement prevent the mortgagee being exposed to negative equity as explained herein below, if the current value at the partial payment date is below the base value of the property, the mortgagee is disadvantaged if the property value appreciates after the partial payment. In contrast, taking for example the current property value of $771 ,429, which results in an outstanding balance equal to the payment of $120,000, the mortgagor has in effect paid off a $200,000 loan with $120,000, which could be viewed as a windfall.

Accordingly, in the currently contemplated preferred embodiment, provision may be made to protect the interest of the mortgagee in the face of a falling property market. One possible provision may be that the current property value at the partial payment date is deemed to be the greater of the base property value and the actual current property value. Alternatively the outstanding balance as at the partial payment date may be deemed to have a minimum value that equals the equity loan amount, which will give the same result in most circumstances. This represents the preferred embodiment as presently contemplated. The effect of this is shown in Figure 13, which shows the same equity finance arrangement and property characteristics as Figure 11 , except that the outstanding balance at the partial payment date is deemed to have a lower limit of $200,000.

Another possible provision may be that for the purposes of partial payments the current property value or the outstanding balance is deemed to be the greater of the base property value or outstanding balance respectively increased at a certain rate and the actual current property value. This latter provision may be used, for example to increase the base property at the rate of inflation or at another rate agreed between the mortgagor and mortgagee.

The equity finance arrangement may include a provision to the effect that the value of the property at the reconciliation date is the greater of the actual value (determined by sale, registered valuation, or based on market data) and the base property value. Alternatively, it may be deemed to be the greater of the actual value and the base property value increased at a certain rate, which may for example reflect inflation. In one embodiment, the equity finance arrangement may provide a limit on the value of the mortgagee's equity share. For example, the property value at the reconciliation date may be capped at a level that represents 10% growth per year. This provision may allow a mortgagor to speculate on the market, for example by choosing to buy in an area that the mortgagor believes is going to provide returns significantly above the market average, without having to give a large proportion of those returns to the mortgagee. It also provides increased certainty to the mortgagor as to the maximum amount that will be required to repay the equity loan and purchase the mortgagee's equity share at the termination of the equity finance arrangement. Absent such a cap, if the property value increased more than expected, the mortgagor would have to pay a much higher amount to purchase the mortgagee's equity share.

As illustrated by the example Property C in Figure 6, two or more partial payments may be made during the term of an equity finance arrangement. In this case, information relating to both partial payments is entered into the database 4, or entered at an interface to the data processing system, and both are considered when determining the outstanding balance based on a current valuation. This is achieved by further modifying the equity loan amount by the percentage reduction in the outstanding balance owed to the mortgagee as at each partial payment date and further modifying the mortgagee's equity percentage share. The further modification uses the same computations as for the first modification described above, but uses the modified values resulting from the previous partial payment as inputs. In addition, further variations to the equity loan amount and/or the mortgagee equity percentage share may be made during the course of the equity finance arrangement. For example, in the case of the example described herein of an equity finance arrangement relating to residential property, the mortgagor may use his or her own funds to renovate the property and the increased value of the property as a result of the renovations may be used to affect both the base property value and the mortgagee equity percentage share for the purposes of determining a final outstanding balance at a future reconciliation date.

Portfolio management and data analysis - additional borrowing Figure 14 shows a flow diagram of a process that may be implemented with the aid of the data processing system 1 to manage an equity finance arrangement when the mortgagor wishes to make an additional borrowing against the mortgagor's equity in the property.

In steps 300 and 301 the database is formed and updated over time. Information 350 relating to the initial formation of the equity finance arrangements is entered into the database and change information 351 is entered to record changes to the portfolio of equity finance arrangements over time, including the occurrence of approved additional borrowing against a property in the portfolio. This process is similar to steps 100 and 101 described herein in relation to Figure 4 and it is anticipated that the same database 4 would be used for storing information relating to partial payments and additional borrowing.

A maximum LVR is defined and the value of the' maximum LVR may be stored in the database 4. For example, the maximum LVR that is permitted when establishing an equity finance arrangement or later may be set at 50%. As previously discussed, setting a maximum ensures that the mortgagor receives at least some of the benefit of a rise in the value of the property overtime.

In step 302 the mortgagor applies to the mortgagee for an additional borrowing. By way of example, the additional borrowing requested may be for $100,000 against a property that had a base property value of

$1 ,000,000 and a 20% LVR before the additional borrowing is taken into account.

In step 303 the outstanding balance as of the date that the application for additional borrowing (the reconciliation date) is made is computed. The current property value as at the reconciliation date is retrieved from the database 4, or entered at an interface to the data processing system. The current property value may be a value determined by a registered valuation of the property. Alternatively, the current property value may be computed as described herein based on the base property value or other later valuation and the market change data 50 (see Figure 2).

The mortgagee equity share is then computed as the difference of the current property value and the base property value multiplied by the mortgagee equity percentage share. Using the example described above, if the current property value is $2,000,000 and the equity finance arrangement specified a repayment factor of 1.75, then the mortgagee equity share is $350,000. The outstanding balance is then $550,000, representing the sum of the mortgagee equity share and the equity loan amount. For clarity it has been assumed in this example that the equity loan amount has not been modified as described previously herein due to a prior partial payment or other variation. The sum of the outstanding balance and the requested additional borrowing as a proportion of the current property value is then compared in step 304 to the maximum LVR. In the example, the sum is $450,000, which is below the product of the maximum LVR and the current property value (50% of $2,000,000). Therefore, provided it meets any other criteria required by the mortgagee, the application is accepted, and the process proceeds to step 305. If the application for additional borrowing requested an amount more than $450,000 so that the sum of the outstanding balance and additional borrowing exceeded 50% of the current property value, then the application would be refused (step 308). In step 305 a new loan entry is created and stored in the database 4 associated with the property. This new loan entry is in addition to the existing loan entry or entries, which reflect the state of equity finance arrangement over the property before the additional borrowing.

The new loan entry includes additional borrowing data, which forms part of the change data 351. This includes:

• a base property value, which is the current property value as of the date of the additional borrowing ($2,000,000 in the example);

• an equity loan amount ($100,000 in the example);

• a loan to value ratio (5.00% in the example);

• a repayment factor, which may be the same as or different to the repayment factor previously used; and

• a mortgagee equity percentage share (8.75% in the example). The additional borrowing data may include all of these values, or at least sufficient data to allow the outstanding balance due on the new loan entry to be computed as explained herein below. This information is stored in the portfolio data 60 against the same property identifier as was used for the equity finance arrangement as it existed before the additional borrowing.

When the outstanding balance due under the equity finance arrangement is to be determined, then the outstanding balance for all of the loan entries associated with that property is computed. Accordingly, in step 306 a current value of the property as at the reconciliation date is received and that is used to determine the mortgagee's equity share for each loan entry.

Using the previously mentioned example where an additional borrowing of $100,000 was made and assuming a current property value as at the reconciliation date to be $3,000,000, then: the mortgagee's equity share for the original loan entry is computed as the increase in value from the original base property value, which is $1 ,000,000, multiplied by the mortgagee's equity percentage share, which is 35%; and the mortgagee's equity share for the new loan entry is computed as the increase in value from the base property value when the new loan entry was made, which is $2,000,000, multiplied by the mortgagee's equity percentage share, which is 8.75%.

Accordingly, the total mortgagee's equity share is $787,500. The total outstanding balance is $1 ,087,500, which is ' the sum of the total mortgagee's equity share and the two equity loan amounts.

If a further additional borrowing was made prior to the reconciliation date, then there would be three loan entries and so on for any still further additional borrowing. Each of the additional loan entries are therefore present for a sub-period of the loan, created when the value of the property has a value that is later in time than the value of the property when the equity finance arrangement was created.

Figure 15 shows a spreadsheet for the example of additional borrowing described above. The information indicated by arrow 500 is the relevant data for the equity finance arrangement at its commencement. The mortgagee's equity percentage share of 35% is the product of the LVR and the repayment factor.

The information indicated by arrow 501 is the data used for evaluating whether the additional borrowing of $100,000 is to be approved. In the spreadsheet a two stage decision process is made. The first stage is to determine whether the mortgagor can borrow any additional amount under an equity finance arrangement. In this stage it is computed whether the current outstanding balance is less than a set maximum loan to value ratio (50% in the example), where the value is the current value of the property. The maximum amount that can be borrowed to bring the LVR up to the maximum LVR is then determined, which is $450,000 in the example and the second stage of the test is whether the requested additional equity loan amount is less than this. If a higher value loan was applied for, the mortgagor and mortgagee could instead agree on a loan that brings the mortgagor up to the maximum LVR. The mortgagor could then look to a debt finance arrangement to cover the difference.

The data indicated by arrow 503 represents the computation of the two outstanding balances for the two equity loan entries.

Equity finance arrangements having a combination of a partial payment, additional borrowing and renovation of the property

In the foregoing description, three different events that affect an equity finance arrangement have been described, namely the occurrence of a partial payment, the occurrence of additional borrowing and the occurrence of a renovation of the property that is the subject of the equity finance arrangement. The data processing system 1 is adapted to accommodate combinations of these events. 1) Additional borrowing following a partial payment or a renovation

When a partial payment is made, a reduced equity loan amount and

LVR results. When a renovation has been completed, the base property value and LVR change. Accordingly, when a partial payment or renovation has occurred before an application for additional borrowing is made, then the application is assessed against he modified values.

An spreadsheet showing an example of the overall treatment in the data processing system 1 of an application for additional borrowing on a property that has been renovated earlier during the lifetime of the equity finance arrangement is shown in Figures 16A and 16B.

The data indicated by arrow 510 is the original state of the equity finance arrangement, which in this example was made in relation to a property having a value of $800,000 and a 30% equity loan was drawn. With a repayment factor of 1.75, then the mortgagee's equity percentage share is

52.50%.

The data indicated by arrow 511 is the state of the equity finance arrangement at the completion of the renovation. The renovations added 10% to the value of the property, with market movement during the time of the renovations ignored in this example. The deemed base property value is therefore increased to $880,000, which results in a change in the LVR and mortgagee's equity percentage share.

The data indicated by arrow 512 indicates the information used to determine the outstanding balance when the application for additional borrowing has been made. This information is used in step 303 of Figure 11. The outstanding balance is computed using the deemed base property value and modified mortgagee's equity percentage share. The outstanding balance of $1 ,013,182 is then used to determine the maximum additional borrowing that can be granted having regard to the maximum LVR and/or other restrictions that may be applied. In the example shown in Figure 13, the additional borrowing of $100,000 is less than the maximum. The data indicated by arrow 513 indicates the state of the original loan entry following the additional borrowing, which remains as modified due to the renovation. The data indicated by arrow 514 indicates the new loan entry, which has a LVR of 4%. The total outstanding balance in the future is then determined as described herein previously and an example of the outstanding balance when the property is valued at $3,000,000 is shown in Figure 13.

2) A partial payment following an additional borrowing

The additional borrowing creates an additional loan entry or account. Therefore, the data processing system 1 needs to allocate a subsequent partial payment across the loan entries.

When a borrower has two or more loan entries for a property and makes a partial payment, in one embodiment the mortgagor may be allowed to choose against which loan the partial payment is credited. The partial payment is then applied to that loan entry alone if the outstanding balance is more than the partial payment. If the partial payment exceeds the outstanding balance, then the mortgagor would choose a second loan entry against which to provide the balance.

Alternatively, a partial payment may be applied to the loan entries on a FIFO basis (first-in-first-out). In other words, the payment will be allocated against the oldest loan entry. If the partial payment is greater than the outstanding balance owing on the oldest loan entry, then the excess is applied to the next oldest loan entry and so on until all of the partial payment amount has been applied. Other alternatives include:

• Requiring all partial payments to be allocated against one loan entry, which is chosen by the mortgagor.

• Allowing a partial payment to be allocated against more than one loan entry chosen by the mortgagor. • Allocation of partial payment on a LIFO (last-in-last-out) basis

• Allocation of a partial payment so as to be pro-rated against all loan entries. The allocation may be according to the outstanding balance, the equity loan amount, an equal division of the payment, or according to another factor.

3) Renovation following an additional borrowing

When the mortgagor renovates a property that is the subject of an equity finance arrangement, the modification to the base property value and

LVR described herein above is applied to each of the loan entries independently of each other. An example equity finance arrangement showing this is provided in the spreadsheet shown in Figures 17A and 17B.

The data indicated by arrow 520 is the data relating to the equity finance arrangement at the commencement of the equity finance arrangement. The data indicated at arrow 521 represents the data used to evaluate an application for additional borrowing and the data indicated at arrows 522 and 523 show a first and second loan entry created due to the additional borrowing.

The data indicated by arrow 524 shows the computation of the change in value added by the renovation, with changes in the market also being ignored in this example. The 10% increase in value is then applied to increase the deemed base property value of both loan entries by 10%, resulting in a new LVR and mortgagee equity percentage share for both loan entries as indicated by arrows 525 and 526.

The future outstanding balance is then computed for both loan entries in the same manner as described previously herein, with an example for a current property value of $3,000,000 provided in Figure 17B.

Combining an equity finance arrangement with a debt finance arrangement

In the preceding example of a partial payment made in relation to an equity finance arrangement, the funds for the partial payment in one embodiment may come from a debt finance arrangement. The mortgagee of the equity finance arrangement may also provide debt finance and may be the source of the funds for the partial payment. Data relating to the debt finance arrangement may be included in the portfolio data 60 and this data may be managed using known data management techniques for debt finance arrangement.

In the preceding example of additional borrowing against the equity of a property, the additional borrowing may in one embodiment be made to repay all or some of a debt finance arrangement. The data processing system 1 may therefore manage three or more loan entries against a property, one for a debt finance arrangement, one for an original equity finance arrangement and one or more for new equity finance arrangements formed through additional borrowing.

Loan termination In one embodiment, the outstanding balance will never be greater than the current value of the property.

In one embodiment, the current value of the property as at the reconciliation date may be the lesser of the actual current property value and a capped value. The capped value may be, for example, be determined based on a fixed maximum increase per year from the base property value, or based on a percentage rate over the period of the finance plus some margin.

In the currently contemplated most preferred embodiment, a two-level floor and a cap is placed on the outstanding balance. A process for determining whether the applicable floor or the cap applies is shown in Figure 18. If a renovation of the property has occurred, then this process may be performed instead of step 107 in Figure 4. Accordingly, the steps in Figure 18 have been numbered 107a-107g. However, partial payments and additional borrowing may also be taken into account before completing the process shown in Figure 18 and the process shown in Figure 18 may be applied when there has been no renovation, partial payment or additional borrowing.

In step 107a a determination is made whether the value of the house has increased, for example by computing whether the current value of the property received in step 106 less the base property value is greater than zero. The base property value used in this computation is preferably the modified base property value for the property, if any, that was computed in step 103.

If the value of the property has increased, then in step 107b a determination is made whether the increase has been greater than a ceiling increase. The ceiling increase in this embodiment is an annual interest rate

(represented by I in Figure 18), plus a margin percentage, which is 9% per annum in the example shown in Figure 18.

In one embodiment, the interest rate (I) may be the time-weighted average of the Reserve Bank Cash Rate Target over the period of the finance (n years). In another embodiment the index may be based on the

Consumer Price Index (CPI). In another embodiment, the index may be based on a market index, which may be a localized or national market index. This index may be determined using the market analysis function described herein previously and as described in more detail in the

Applicant's co-pending Australian patent application entitled 'Apparatus and method for property portfolio management'. However, other measures of market movement may be used. In other embodiments other indexes may be used, for example Gross Domestic Product (GDP). The selection of an appropriate index will depend to some degree on what indexes are commercially acceptable to both the mortgagor and the mortgagee.

If the house value has increased at a rate greater than I plus 9% per annum, then the mortgagee's equity percentage share is applied only to the increase in value up to that threshold. This is indicated in step 107c as the repayment protection cap rate in value (E) equalling the rate I plus 9% per annum. The deemed increase in value is then equal to the base property value annually compounded at the rate of I plus 9% over the period of the finance (n years), less the base property value. The mortgagee's equity share is then the product of the deemed increase in value and the mortgagee's equity percentage share. In this embodiment, where the time-weighted cash rate is 5.8698% per annum since the date that the base property value was determined, the repayment protection cap rate would be 5.8698% per annum plus a margin of 9% per annum. If we assume for the purposes of example that the equity finance arrangement has been in place for a period of 5 years, on a property that has a base property value of $1 ,000,000, the increase in the value of the property required to reach the ceiling increase is $1 ,000,000.

Therefore, if the actual property value, as determined by a valuation or sale of the property exceeds $2,000,000, then the mortgagor owns all of the increase in value of the property above $2,000,000. The table on the right hand side of Figure 19 is an example of this situation, where the future mortgagee's equity share for future property values greater than $2,000,000, is capped at $787,500. This is to be contrasted with the table on the left hand side where no cap is applied and the future mortgagee's equity share continues to rise with the future property value. Using this method, characteristics of the particular property that make it unique in its market can predominantly benefit the mortgagor, who selected the property.

The margin percentage may be a fixed amount, which is 9% in the example shown in Figure 18. In alternative embodiments, the percentage may be variable over the life of the equity finance arrangement. The variability may be dependent on or be independent of the index I. An example of a dependent variability may be that the percentage decreases as I exceeds a certain threshold. An example of an independent variability would be an equity finance arrangement that allows early repayment, and which has a margin that changes over the term of the equity finance arrangement. If the house value has not increased at greater than the time- weighted cash rate target plus 9% per annum, then in step 107d, the outstanding balance is computed in accordance with the method described herein previously for step 107 in Figure 4. If in step 107a it is determined that the value of the property has not increased from the base value, then in step 107e, it is determined whether the value of the property is greater than or less than the value of the equity loan amount. If the value of the property is greater than the equity loan amount, then in step 107f, the outstanding balance is deemed to be equal to the equity loan amount.

This situation is shown in the right hand table in Figure 19 where the base property value is $1 ,000,000, the equity loan amount is $450,000 and the current property value is $600,000 or $800,000.

If in step 107e it is determined that the value of the property is less than the equity loan amount, then the outstanding balance is deemed to be the value of the property. An example of this situation is shown in the right hand table in Figure 19 where the current property value is $400,000, resulting in the outstanding balance being less than the equity loan amount.

This floor prevents the mortgagor being exposed to negative equity in the property. The mortgagee's exposure to negative equity is limited to the difference between the equity loan amount and the current property value.

Figure 20 shows values for the same circumstances as Figure 19, except that the margin has been increased from 9% per annum to 11 % per annum. The effect of this is to increase the threshold value of the property beyond which the mortgagor owns 100% of the value, which in turn increases the ceiling on the mortgagee's equity share.

Figure 21 shows the values for the same circumstances as Figure 19, except that the time-weighted cash rate target has been reduced from 5.8698% to 4%. It will be appreciated that the equity finance arrangements described above can be coupled with a debt finance arrangement, and in the preferred embodiment the debt and equity finance arrangements are provided as a single loan facility from a single financial institution. Clearly, where equity loans vary over the life of the financing arrangements the equity position needs to be carefully assessed, as described herein, but it is envisaged that a flexible arrangement where a home owner can transfer funds between a debt loan and an equity loan within the envelope of a single loan facility will provide the typical home owner with the optimum facility to ensure their residential loan finance arrangements best mirror their changing financial situation.

Where in the foregoing description reference has been made to integers having known equivalents, then those equivalents are hereby incorporated herein as if individually set forth. Those skilled in the relevant arts will appreciate that modifications and additions to the embodiments of the present invention may be made without departing from the scope of the present invention.

In particular, those skilled in the relevant arts will appreciate that the computations described herein may be replaced by equivalent computations or approximations to the computations and that the invention disclosed is intended to include all such equivalent computations and approximations.

It will be understood that the invention disclosed and defined in this specification extends to all alternative combinations of two or more of the individual features mentioned or evident from the text or drawings. All of these different combinations constitute various alternative aspects of the invention.

Claims

1. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre-renovation property value and a post-renovation property value; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes:

1 ) a modified base property value that is determined dependent on a measure of the percentage difference between the pre-renovation property value and the post-renovation property value;

2. The electronic data processing system of claim 1 , wherein the modified base property value equals the base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post-renovation value.

3. The electronic data processing system of claim 1 , wherein the modified base property value is the base property value increased by a modified percentage of the percentage difference between the pre- renovation property value and the post-renovation value.

4. The electronic data processing system of claim 1 or claim 2, wherein the data processing means computes the mortgagee equity share as the product of the difference between the current value of the property and the modified base value of the property and a mortgagee equity percentage share, wherein the mortgagee equity percentage share is computed by the data processing means to be a value that equals the product of the repayment factor and the equity loan amount divided by the modified base value of the property.

5. The electronic data processing system of any one of the preceding claims, wherein the electronic processing system receives, stores or uses the data processing means to compute a measure of movement of the market for the property between the times at which the pre- renovation property value and the post-renovation value were determined, and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property value in the computation of the mortgagee equity share of the property after it has been renovated.

6. The electronic data processing system of any one of the preceding claims, wherein the electronic storage is a database containing information relating to a portfolio of properties of a mortgagee and an equity finance arrangement for each of the properties, the information including a base property value, an equity loan amount and a repayment factor for each of the properties and further includes a pre-renovation property value and a post-renovation property value for a plurality of the properties, wherein the data processing system is adapted to compute and output and/or store a said mortgagee equity share for any one of the properties, using said modified base property value to compute the mortgagee equity share for any property that has in the database a pre-renovation property value and a post- renovation value for that property. In this embodiment, the data processing system may be further adapted to compute a said mortgagee equity share for a group of the properties and/or all properties in the database.

7. The electronic data processing system of any one of the preceding claims, wherein the current value of the property as at the reconciliation date is deemed to be the base value if the base value is greater than the actual current value of the property as at the reconciliation date.

8. A method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagor, the method including determining the proportion of the value of the property following the renovation that is attributable to the renovation and crediting the mortgagor with the full value of the same proportion of a future valuation of the property, and splitting the remaining proportion between the mortgagee and the mortgagor according to the terms of the equity finance arrangement.

9. The method of claim 8, further including normalising the change in value of the property following renovation by the mortgagor against a change in the market and using the normalised change in the value of the property to determine the proportion of the value of the property following the renovation that is attributable to the renovation.

10. A computer implemented method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has been renovated by the mortgagor, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre-renovation property value and a post-renovation property value; in the data processing system computing a mortgagee equity share of the property, wherein the process of computing includes:

1 ) computing a modified base property value that is determined dependent on a measure of the percentage difference between the pre-renovation property value and the post-renovation property value; and

2) computing the mortgagee equity share of the property after it has been renovated using as inputs to the computation the equity loan amount, the repayment factor, the modified base property value, and a current value of the property.

11. The method of claim 10, including computing the mortgagee equity share as the difference between the current value of the property and the modified base value of the property multiplied by a mortgagee equity percentage share, wherein the mortgagee equity percentage share is determined to be a value that equals the product of the repayment factor and the equity loan amount divided by the modified base value of the property.

12. The method of claim 10 or claim 11 , including computing the modified base property value as equalling the base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post-renovation value.

13. The method of claim 10 or claim 11 , wherein the modified base property value is the base property value increased by a modified percentage of the percentage difference between the pre-renovation property value and the post-renovation value.

14. The method of any one of claims 10 to 13, including computing a measure of movement of the market for the property between the times at which the pre-renovation property value and the post- renovation value were determined and modifies the pre-renovation property by the same proportion as the movement of the market for the property and uses the modified pre-renovation property in the computation of the mortgagee equity share of the property after it has been renovated.

15. A method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagee, the method including receiving a valuation of a property before and after the renovation, receiving a measure of the change in value of the property between the valuations that is attributable to a change in the market, computing at least one of the change in value of the property normalised against the change in the market, and using the normalised change in value to determine the proportion of equity ownership between the mortgagee and mortgagor.

16. An electronic data processing system for use in managing an equity finance arrangement for a property between a mortgagee and a mortgagor, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a pre-renovation property value determined at a first time, a post-renovation value determined at a second time and market information defining a change in a market for the property over a period of time that includes both the time that the pre-renovation property value and the post-renovation value were determined; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes the mortgagee equity share of the property at a time after the time that the post-renovation value was determined, the computation depending on the equity loan amount, the repayment factor and the post renovation value and/or the pre-renovation value varied to attribute for the change in the market for the property between the first and second times.

17. The electronic data processing system of claim 16, wherein there are a plurality of properties in the electronic storage, each of which have pre-renovation values and/or post renovation values determined at different dates and the market information spans the period of time between the earliest and latest dates and wherein the data processing means is adapted to compute the mortgagee equity share for any one of the plurality of properties and/or any group or all of the plurality of properties.

18. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a mortgagee equity percentage share, a pre-renovation property value and a post- renovation property value; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage and computes:

1 ) a modified base property value that is increased relative to the base property value dependent on a measure of the percentage difference between the pre-renovation property value and the post- renovation property value;

2) a modified mortgagee equity percentage share of the property that is decreased relative to the mortgagee equity percentage share of the property dependent on the measure of the percentage difference between the pre-renovation property value and the post-renovation property value; and

19. The electronic data processing system of claim 18, wherein the modified base property value is the original base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post-renovation property value.

20. The electronic data processing system of claim 18 or claim 19, wherein the modified mortgagee equity percentage share of the property is decreased by dividing it by the post-renovation property value expressed as a percentage of the pre-renovation property value.

21. The electronic data processing system of any one of claims 18 to 20, wherein the data processing means computes or receives a measure of movement of the market for the property between the times at which the pre-renovation property value and the post-renovation value were determined and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property in the computation of the mortgagee equity percentage share of the property after it has been renovated.

22. A computer implemented method of determining the proportion of equity ownership between a mortgagee and a mortgagor in an equity finance arrangement at a certain time when the property that is the subject of the equity finance arrangement has previously changed value during the term of the equity finance arrangement following renovation by the mortgagee, the method including: storing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a mortgagee percentage equity share, a pre- renovation property value and a post-renovation property value; and computing from the stored information:

2) a modified mortgagee equity share of the property that is decreased relative to the mortgagee ^• equity share of the property dependent on the measure of the percentage difference between the pre-renovation property value and the post-renovation property value; 3) a mortgagee equity share of the property as the product of the modified mortgagee, equity percentage share with the difference between a current valuation of the property and the modified base property value; wherein the data processing means controls the electronic data processing system to output to an interface and/or store in the electronic storage the computed mortgagee equity share of the property.

23. The method of claim 22, wherein the modified base property value is the original base property value increased by the same percentage as the percentage difference between the pre-renovation property value and the post-renovation property value.

24. The method of claim 22 or claim 23, wherein the modified mortgagee equity percentage share of the property is decreased by dividing it by the post-renovation property value expressed as a percentage of the pre-renovation property value.

25. The method of any one of claims 22 to 24, including computing a measure of movement of the market for the property between the times at which the pre-renovation property value and the post- renovation value were determined and modifies the pre-renovation property value by the same proportion as the movement of the market for the property and uses the modified pre-renovation property in the computation of the mortgagee equity percentage share of the property after the property has been renovated.

26. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means, which receives the information relating to the property and the equity finance arrangement from the electronic storage, receives from the electronic storage or from another interface to the data processing system a partial payment amount, a current property value as at the partial payment date, and a current property value as at a reconciliation date that follows the partial payment date, and computes an outstanding balance as at the reconciliation date by, reducing the equity loan amount by the proportion of an outstanding balance of the equity finance arrangement as at the partial payment date that was paid by the partial payment, to result in a deemed equity loan amount and then, using as inputs to the computation the deemed equity loan amount, the current property value as at the reconciliation date and the information , relating to the property and the equity finance arrangement; wherein the data processing system stores in the electronic storage and/or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

27. The electronic data processing system of claim 26, wherein the data processing system computes the outstanding balance by reducing the mortgagee's equity percentage share by the same proportion as the reduction in the equity loan amount. In this embodiment, the outstanding balance may be computed so that when viewed as a return on the partial payment, the reduction in the outstanding balance as at the reconciliation date due to the partial payment is constant, regardless of the amount of the partial payment.

28. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means that computes an outstanding balance as at a reconciliation date that follows a date at which a partial payment was made or is deemed to have been made, the computation depending on the information relating to the property and the equity finance arrangement, the partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date, wherein the . data processing system computes the outstanding balance so that when viewed as a return on the partial payment, the reduction in the outstanding balance as at the reconciliation date due to the partial payment is constant, regardless of the amount of the partial payment; wherein the data processing system stores in the electronic storage and/or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

29. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a partial payment amount and a current property value as at the partial payment date from the electronic storage, or from another interface to the data processing system and computes an outstanding balance as at a reconciliation date that follows the partial payment date by:

1 ) receiving from the electronic storage or from an interface to the data processing system a current property value as at the reconciliation date; 2) computing or receiving a modified equity loan amount, wherein the modified equity loan amount is the equity loan amount less the equity loan amount multiplied by the percentage reduction of an outstanding balance as at the partial payment date attributable to the partial payment; and 3) computing the outstanding balance as at the reconciliation date so as to have a value that equals the modified equity loan amount plus a mortgagee equity share, wherein the mortgagee equity share is the difference between the current property value as at the reconciliation date and the base property value, multiplied by a modified mortgagee equity percentage share, and wherein the modified mortgagee equity percentage share is the percentage of the base property value represented by the modified equity loan amount multiplied by the repayment factor; wherein the data processing system stores in the electronic storage or otherwise outputs at least the computed outstanding balance as at the reconciliation date.

30. The electronic data processing system of claim 29, wherein the outstanding balance as at the partial payment date is: the sum of the equity loan amount and the difference between the current property value as at the partial payment date and the base property value, multiplied by the mortgagee equity percentage share, wherein the mortgagee equity percentage share is dependent on the repayment factor and the proportion of the base property value covered by the equity loan amount. The outstanding balance as at the partial payment date may be either received by the data processing means from the electronic storage or from another interface to the data processing system, or computed by the data processing means, the receipt or computation occurring prior to the performance of step 2).

31. The electronic data processing system of any one of claims 28 to 30, wherein the current property value as at the partial payment date is deemed to be the base property value if the base property value is greater than the actual current property value as at the partial payment date.

32. The electronic data processing system of any one of claims 28 to 30, wherein the current property value is deemed to be the greater of the base property value increased at a certain rate up to the date of the partial payment and the actual current property value.

33. The electronic data processing system of any one of claims 28 to 32, wherein the current property value as at the reconciliation date is deemed to be the base property value if the base property value is greater than the actual current property value as at the reconciliation date.

34. The electronic data processing system of any one of claims 28 to 33, wherein the electronic storage includes a database containing information relating to a portfolio of properties of a mortgagee and an equity finance arrangement for each of the properties, the information including a said base property value, equity loan amount and repayment factor for each of the properties and further includes a partial payment for a plurality of the properties, wherein the data processing system is adapted to compute and output and/or store a said outstanding balance as at a said reconciliation date for any one of the properties.

35. The electronic data processing system of claim 34, wherein the data processing system is further adapted to compute a said mortgagee equity share and/or a said outstanding balance as at the reconciliation date for a group of the properties and/or all properties in the database.

36. The electronic data processing system of any one of claims 28 to 35, wherein In one embodiment, the current property value as at the date of the partial payment and/or as at the reconciliation date is determined based on market data.

37. The electronic data processing system of claim 36, wherein the electronic storage includes information defining movement in the market for the property over time and this information and the base property value is used by the data processing system to determine the current property value.

38. A method of managing an equity finance arrangement between a mortgagee and a mortgagor when a partial payment is made by the mortgagor during the term of the equity finance arrangement, the method including determining the proportion of an outstanding balance of the equity finance arrangement that is paid by the partial payment, and dependent on that proportion: reducing an equity loan amount of the equity finance arrangement to a deemed equity loan amount; and reducing a current mortgagee's equity percentage share under the equity finance arrangement.

39. The method of claim 38, the equity loan amount and the current mortgagee's equity percentage share are both reduced by the same proportion as the proportion of an outstanding balance of the equity finance arrangement that is paid by the partial payment.

40. A computer implemented method of determining the outstanding balance of an equity finance arrangement at a reconciliation date, when a partial payment has been made by the mortgagor before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, information defining a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing means computing the outstanding balance as at the reconciliation date and outputting the computed outstanding balance, wherein the process of computing includes reducing the equity loan amount by the proportion of an outstanding balance of the equity finance arrangement as at the partial payment date that was paid by the partial payment, to result in a deemed equity loan amount and then, using as inputs to the computation the deemed equity loan amount, the current property value as at the reconciliation date and the information relating to the property and the equity finance arrangement.

41. A computer implemented method of determining an outstanding balance of an equity finance arrangement at a reconciliation date when a partial payment has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, information defining a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing system using said information to compute and output the outstanding balance as at the reconciliation date so that the reduction in the outstanding balance as at the reconciliation date caused by the partial payment, viewed as a return on the partial payment, is constant regardless of the amount of the partial payment.

42. A computer implemented method of determining the outstanding balance of equity finance arrangement at a reconciliation date when a partial payment has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including: receiving at a data processing means information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount, a repayment factor, a partial payment amount, a current property value as at the partial payment date, and a current property value as at the reconciliation date; in the data processing system computing an outstanding balance as at the reconciliation date and outputting the computed outstanding balance, wherein the process of computing includes: computing a modified equity loan amount, wherein the modified equity loan amount is the equity loan amount less the equity loan amount multiplied by the percentage reduction of an outstanding balance as at the partial payment date that is attributable to the partial payment; and computing the outstanding balance as at the reconciliation date so as to have a value that equals the modified equity loan amount plus a mortgagee equity share, wherein the mortgagee equity share is the difference between the current property value as at the reconciliation date and the base property value, multiplied by a modified mortgagee equity percentage share, and wherein the modified mortgagee equity percentage share is the percentage of the base property value represented by the modified equity loan amount multiplied by the repayment factor.

43. The method of claim 42, wherein the outstanding balance as at the partial payment date is the sum of the equity loan amount and the difference between the current property value as at the partial payment date and the base property value, multiplied by the mortgagee equity percentage share, wherein the mortgagee equity percentage share is dependent on the repayment factor and the proportion of the base property value covered by the equity loan amount.

44. A computer implemented method of determining an outstanding balance of an equity finance arrangement for a property at a reconciliation date when an additional borrowing has been made by a mortgagor of the equity finance arrangement before the reconciliation date, the method including: creating an additional equity finance arrangement relating to the additional borrowing, the additional equity finance arrangement determined to have a mortgagee's equity percentage share that is dependent on the amount of the additional borrowing relative to a current value of the property when the additional borrowing was made; computing an outstanding balance as a sum of the outstanding balances of the equity finance arrangement and the additional equity finance arrangement.

45. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information including a base property value, an equity loan amount and information defining a repayment factor; and data processing means, which receives the information relating to the property and the equity finance arrangement from the electronic storage, receives from the electronic storage or from another interface to the data processing system an additional borrowing amount, a current property value as at the additional borrowing date, and a current property value as at a reconciliation date that follows the additional borrowing date, and computes an outstanding balance as at the reconciliation date by creating an additional equity finance arrangement relating to the additional borrowing, the additional equity finance arrangement determined to have a mortgagee's equity percentage share that is dependent on the amount of the additional borrowing relative to a current value of the property when the additional borrowing was made and computing an outstanding balance as a sum of the outstanding balances of the equity finance arrangement and the additional equity finance arrangement.

46. A method of managing a portfolio of loan arrangements over a property, the method including storing in electronic storage data relating to and defining an equity finance arrangement and a debt finance arrangement relating to the property, the method further including increasing the loan amount of the debt finance arrangement and applying at least a portion of the increase in the loan amount of the debt finance arrangement as a partial payment of the equity finance arrangement.

47. The method of claim 46, wherein the step of applying at least a portion of the increase in the loan amount of the debt finance arrangement as a partial payment of the equity finance arrangement includes applying the method of any one of claims 38 to 43.

48. A method of managing a portfolio of loan arrangements over a property, the method including storing in electronic storage data relating to and defining an equity finance arrangement and a debt finance arrangement relating to the property, the method further including creating a further equity finance arrangement over the property and applying at least a portion of an equity loan amount provided under the further equity finance arrangement to decrease the loan amount of the debt finance arrangement.

49. The method of claim 48, wherein the step of creating a further equity finance arrangement over the property includes treating the equity loan amount as an additional borrowing in the method of claim 44.

50. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information defining a base property value, an equity loan amount and at least one of a mortgagee's equity percentage share and a repayment factor that defines a mortgagee's equity percentage share; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a current value of the property that is higher than the base property value and computes an outstanding balance by: if the current value of the property has increased by more than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between the ceiling amount and the base property value and the mortgagee's equity percentage share; if the current value of the property has increased less than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between the current value of the property and the base property value and the mortgagee's equity percentage share.

51. An electronic data processing system for use in managing an equity finance arrangement between a mortgagee and a mortgagor for a property, the data processing system including: electronic storage containing information relating to the property and the equity finance arrangement, the information defining a base property value, an equity loan amount and at least one of a mortgagee's equity percentage share and a repayment factor that defines a mortgagee's equity percentage share; and data processing means that receives the information relating to the property and the equity finance arrangement from the electronic storage, receives a current value of the property that is less than the base property value and computes an outstanding balance by: if the current value of the property is higher than the equity loan amount, then determining the outstanding balance to be equal to the equity loan amount; if the current value of the property is lower than the equity loan amount, then determining the outstanding balance to be equal to the current value of the property.

52. A computer implemented method of determining the outstanding balance between a mortgagee and a mortgagor in an equity finance arrangement that includes an equity loan amount provided by the mortgagee to the mortgagor which represents a percentage of a base property value of the property that is the subject of the equity finance arrangement, the method including receiving a current value of the property and computing the outstanding balance by: if the current value of the property has increased by more than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between the ceiling amount and the base property value and a mortgagee's equity percentage share; and if the current value of the property has increased less than a ceiling amount, then computing the outstanding balance as the sum of the equity loan amount and the product of the difference between current value of the property and the base property value and a mortgagee's equity percentage share; and/or ; if the current value of the property has decreased below the base property value but is higher than the equity loan amount, then determining the outstanding balance to be equal to the equity loan amount; and if the current value of the property has decreased below the base property value and is lower than the equity loan amount, then determining the outstanding balance to be equal to the current value of the property.

53. A method for determining a repayment amount which a mortgagor must repay to a mortgagee for a total loan amount secured against a real estate property, the method including the steps of: establishing a loan facility for the total loan amount repayable after a period of time has elapsed, or on the occurrence of a specified event, said loan facility comprising a debt loan amount and an equity loan amount, said amounts initially being in the ratio of between 0% and 100% of each other; allowing a mortgagor during the existence of the loan facility to vary the ratio of the debt and equity loan amounts relative to each other at least once; and on termination of the loan, determining the amount to be repaid to the mortgagee by summing the unpaid dept portion, the unpaid equity portion, and the sum of the increased value portions.

54. The method of claim 53, including during the existence of the loan facility, determining one or more sub-periods during which the mortgagor had an equity loan amount and the period for which the equity loan amount was in existence; receiving regular payments from the mortgagor in respect of interest on the debt loan amount; and allocating to the mortgagee an increased value portion which is based on a proportion of the increase in the value of the real estate over the or each sub-period relative to the value of the equity portion during that period.

55. A method for determining the equity interest which a mortgagee has in a real estate property obtained in respect of an equity loan secured by a borrower against the property, the method including the steps of: establishing a loan facility in favour of the mortgagor; allowing the mortgagor to make an initial equity loan against the loan facility thereby providing the mortgagee with an equity interest in the real estate; allowing the mortgagor to vary the quantum of the equity loan from time to time to thereby create a series of sequential equity loans of varying amounts, each being in existence for a sub period of the loan; establishing the value of the real estate at the start and end of each of said sub period; varying the portion of equity interest in the real estate that the mortgagee has at the start of each sub period depending at least in part on the change of value of the real estate property; and establishing on termination of the loan the equity interest that the mortgagee has in the real estate.

56. The method of claim 55, wherein the loan facility comprises a combination of a debt loan and an equity loan, the method including providing for the borrower to vary the quantum of the equity loan by increasing or decreasing the quantum of the debt loan, and providing a corresponding decrease or increase in the quantum of the equity loan.

57. The method of claim 55, wherein the loan facility comprises a combination of a debt loan and an equity loan, and for the borrower to vary the quantum of the debt loan by increasing or decreasing the quantum of the equity loan, and providing a corresponding decrease or increase in the quantum of the debt loan.

58. The method of any one of claims 55 to 57, wherein the step of establishing the value of the real estate at the start and end of each of sub-period is established by estimation based on an index reflective of the change in value of real estate of a similar nature during the relevant periods.

59. The method of any one of claims 55 to 57, wherein one or both of the valuations are established by a specific valuation of the relevant property on or about the relevant date.