WO2017000026A1

WO2017000026A1 - System and method for providing equity assistance for a property purchase

Info

Publication number: WO2017000026A1
Application number: PCT/AU2016/050553
Authority: WO
Inventors: Warwick POLLARD
Original assignee: Equity Assist Home Purchase Plan Holdings Pty Ltd
Priority date: 2015-06-29
Filing date: 2016-06-28
Publication date: 2017-01-05

Abstract

A method for providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising the steps of: the equity provider and property purchaser enter into a tenants in common agreement (TICA) in relation to the property, the TICA including the following terms: that the equity provider provides an amount of money for use by the property purchaser in purchasing the property and whereby a remaining amount of money required to purchase the property is funded by the property purchaser; that the property is purchased with the property purchaser and the equity provider being recorded as tenants in common on the title deed; and that, at the end of a stipulated deferment period, the property purchaser: returns to the equity provider the amount of money that the equity provider initially provided for the purchase together with a deferred equity investment return payment in respect thereof, as well as a share in capital gain.

Description

System and Method for Providing Equity Assistance for a Property

Purchase

Field of the Invention

This invention relates to a system and method for providing equity assistance to property buyers.

Background of Invention

The press regularly reports that housing in Australia is amongst the least affordable in the world.

Housing affordability is generally measured by determining the gap between wages and house prices. It has been reported that in Australia, the average wage has risen in percentage terms less than the average increase of the median house price over the same period. This means a greater percentage of household income is needed to service a mortgage, and those in the lower wage brackets are being progressively squeezed out of home ownership and may never have the opportunity to own their own home .

The underlying factors that make housing less affordable in Australia are showing no signs of changing. The current increase in house prices, the lack of new housing stock being built and an expanding population continues to sustain the current problem of housing affordability . The national average house price grew at an annual rate of 8.43% from $37,500 in 1980 to $425,500 in 2010, and is still rising.

Summary of Invention

In accordance with a first aspect there is provided a method fo providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising the steps of: the equity provider and property purchaser enter into a tenants in common agreement (TICA) in relation to the property, the TICA including the following terms : that the equity provider provides an amount of money for use by the property purchaser in purchasing the property and whereby a remaining amount of money required to purchase the property is funded by the property purchaser; that the property is purchased with the property purchaser and the equity provider being recorded as tenants in common on the title deed; and that, at the end of a stipulated deferment period, the property

purchaser: returns to the equity provider the amount of money that the equity provider initially provided for the purchase together with a deferred equity investment return payment in respect thereof, as well as a share in the capital gain.

In an embodiment the capital gain is either the capital gain since the property was purchased, or the capital gain above the deferred equity return investment payment, whichever is the greater .

In an embodiment the method further comprises the step of scheduling the TICA on the certificate of title and whereby the step of scheduling is an additional term of the TICA.

In an embodiment the method further comprises the step of lodging a caveat such that the equity provider' s interest in the purchased property is covered by a caveatable interest.

In an embodiment the TICA additionally requires that the property purchaser provide a deposit for use in purchasing the property and whereby the remaining amount minus the deposit is financed by way of a principal plus interest mortgage.

In an embodiment the deposit is at least 5% of the purchase price . In an embodiment the TICA additionally requires that the term of the mortgage corresponds to the term of the deferment period. In an embodiment the TICA additionally requires that at the end of the deferment period the property purchaser either sell or purchase the property outright such that the equity provider no longer has a recorded interest in the property.

In an embodiment the TICA additionally requires that a licenced valuer value the property prior to the sale/purchase and whereby both the equity provider and property purchaser must agree on a minimum recommended sale or reserve price before the

sale/purchase can proceed. operty pur

end of the

at the equ

agrees to the early sale

In an embodiment the TICA additionally requires that the property purchaser is responsible for property ownership costs during the deferment period.

In an embodiment the investment return rate payable on the amount of money provided by the equity provider is between 3 to 12%% p/a. In an embodiment the investment return rate payable on the amount of money provided by the equity provider is between 8 and 9% p/a.

In an embodiment the investment return rate payable on the amount of money provided by the equity provider is 6.5% %.

In an embodiment the TICA additionally requires that an

insurance policy be taken out by the property purchaser. In an embodiment the insurance policy is income and life protection and/or fire and all risk insurance policy. In an embodiment the amount of money provided by the equity provider is between 10% to 55% of the purchase price.

In an embodiment the amount of money provided by the equity provider is 45% of the purchas : price.

In an embodiment the deferment period is between 3 years to 20 years . In an embodiment the maximum deferment period is 15 years.

In an embodiment the method further comprises the step of the property purchaser electronically submitting an electronic equity loan application in respect of the property with an equity administrator system and whereby the equity provider can access and approve the electronic application and wherein following the approval the property purchaser and equity provider enter into the TICA. In an embodiment the equity administrator system provides an electronic template which can be accessed by both the property purchaser and equity provider to prepare the TICA.

In accordance with a second aspect there is provided a computer readable medium implementing a computer program comprising at least one instruction which, when implemented by a computer system, is operable to carry out the method as described in accordance with the first aspect. In accordance with a third aspect there is provided a system for providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising: a database storing information associated with at least one equity loan application for equity assistance toward the purchase of a property by a property purchaser. In an embodiment the system further comprises a computer application for allowing equity providers to review and

selectively approve equity loan applications stored by the database and whereby following approval of an equity loan application the property purchaser and equity provider enter a TICA agreement as described in accordance with the first aspect.

Brief Description of the Drawings

Features and advantages of the present invention will become apparent from the following description of embodiments thereof, by way of example only, with reference to the accompanying drawings, in which:

Figure 1 is a process flow for implementing an equity investor arrangement in accordance with an embodiment; and

Figure 2 is a schematic of a computer platform, in accordance with an embodiment.

Detailed Description of Preferred Embodiments

Embodiments described herein relate to a computer system and methodology for providing equity assistance to property

purchasers allowing them to purchase property that they may otherwise have either been unable or found difficult to afford using traditional mortgage arrangements. Embodiments also advantageously provide investors (i.e. the providers of the equity and hereafter referred to as "equity providers") with a safe and financially sound investment vehicle that may provide market level returns. Thus, embodiments may advantageously increase the property purchaser' s purchasing power without increasing their mortgage commitments .

In general terms, the methodology comprises an equity provider contributing a portion of the total purchase price of a property for use by a property purchaser in purchasing the property, with the remaining portion to be funded by the property purchaser. Typically, the remaining portion will comprise a deposit raised by the property purchaser, as well as a conventionally financed principal and interest mortgage component (hereafter "first mortgage") . The portion contributed by the equity provider takes the form of an equity share of the property whereby the equity provider receives a return (hereafter "deferred payment") on the contributed portion of equity (i.e. at an agreed rate of return) at the end of an agreed time period (hereafter "deferment period"), e.g. 15 years. In addition, at the end of the

deferment period the equity provider receives a share of the capital gain (calculated or realised) for the property above the amount of the deferred payment. The property purchaser enjoys the remaining equity share.

The deferred payment is an important aspect of the present invention which makes the equity contribution commercially viable . By applying an agreed percentage rate of return on the equity contribution, the return to the equity provider is secured as it will be paid from the ever increasing pool of equity associated with the property; particularly from the initial deposit made by the property purchaser and the mortgage repayments which progressively reduce the outstanding first mortgage debt. Additionally, capital gain across 100% of the property further covers the equity provider' s equity share position, hedging unpredictable capital gain fluctuations.

In a particular embodiment the amounts, rates and time periods of the agreement between the equity provider and property purchaser (hereafter "equity investment agreement") may be structured such that the repayments on the first mortgage to be made by the property purchaser over the deferment period are less than the current rent equivalent for the same property. It will be understood that the property purchaser may choose to contribute more equity into the property purchase, which will reduce their monthly first mortgage repayments, as well as provide larger equity pool to cover the capitalization of the equity provider's future repayment.

In more detail, and with reference to Figure 1, a particular embodiment of the invention comprises implementing an equity investor arrangement whereby property purchasers can apply for an equity investment (EQI) contribution as part of their finance application process. In a particular embodiment, the

arrangement is administered by a third party EQI administrator. Equity providers subscribe to the arrangement and can

selectively agree to provide equity contributions to property purchasers who have applied for an EQI. It will be understood that in an alternative embodiment the property purchasers may communicate directly with the equity providers (i.e. such that the need for an EQI administrator is obviated) .

In a particular embodiment, and with additional reference to Figure 2, the EQI administrator 10 implements a computer platform 100 comprising a web server 110. The web server 110 hosts various web applications accessible by the property purchasers 12 and equity providers 1 . According to embodiments described herein, the web applications are accessible by way of a browser on any suitable network-enabled computing device, over the network 112. The network 112 may be any suitable fixed and/or mobile communications network, e.g., the Internet or a private intranet, and may use any suitable protocol for the exchange of electronic data, e.g., TCP/IP, NNTP, HTTP, etc. It will be understood that in an alternative embodiment, the parties 12, 14 can access the web applications via a native application installed on a personal user computer device (e.g. mobile phone, tablet, etc.), as will be well understood by persons skilled in the art.

The web server 110 is communicable with a data store 122. The data store 122 comprises a client record database 124. The data store 122 may be implemented using any suitable relational database application program, such as, e.g., oracle, Sybase and the like.

Property purchasers 12 submit EQI applications to the EQI administrator 10 via a property purchaser application

administered by the web server 110, for subsequent storing in the data store 122 against a client record that has been created for the respective property purchaser. In a particular

embodiment, the property purchaser application may provide a template including selectable fields which allows the property purchaser to electronically complete and submit the electronic application. The template will include similar fields such as for a typical bank mortgage application to be completed by the purchaser (e.g. financial credentials, property related

information, etc.). Alternatively, paper based applications can be completed and submitted by property purchasers 12 for subsequent uploading to the data store 122 by an operator.

The web server 110 additionally implements an equity provider web application which is accessible by the registered equity providers 14 for viewing and selectively approving uploaded EQI applications (stored in the data store 122), as described in more detail in subsequent paragraphs. In a particular

embodiment the equity providers 14 pay a fee for registering with the EQI administrator 10. It will be understood that any suitable fee structure could be implemented by the EQI

administrator 10. Advantageously, the equity providers 14 may log in to the web application to view pertinent details of EQI contributions that have provided to purchasers . The application may, for example, show the equity provider details such as the remaining term for their EQI contributions, the complete property history and details (e.g. contract, etc.), the return deferred payment rates and current values, mortgage repayment details (e.g. whether the purchaser is up to date with their mortgage, whether they have made additional repayments, etc.). The application could be used, for example, to calculate a current payout figure. Another advantageous aspect of the application is the ability to allow the equity provider to calculate investment returns on annual or other periodic basis (e.g. across all their EQI contributions) . It will be

understood that the application could be used to display and calculate any other desired pertinent information, depending only on the desired implementation.

Returning to Figure 1, in a first step SI the property

purchaser 12 submits an application for an EQI with the

EQI administrator 10. All submitted applications will be qualified against a set of pre-agreed property guidelines and standards .

In a second step (step S2 ) , the application is entered into th> data store 122 for subsequent viewing and consideration by the registered equity providers 14.

At step S3 one of the registered equity providers approves the EQI application and enters into a legally binding agreement with the property purchaser in respect of a property they wish to purchase (step SI) . In a particular embodiment, a valuation will be obtained in the approval process such that properties, when approved by equity provider, will also be acceptable for mortgage purposes.

The agreement covers all rights, obligations and contingencies between the two parties 12, 14. For reasons which will become evident in subsequent paragraphs, the agreement shall hereafter be referred to as a "tenants in common agreement" (TICA) . The relevant mortgage documentation will acknowledge the existence of the TICA. In a particular embodiment, the TICA includes the following terms and conditions:

1. That the equity provider 14 provides the property

purchaser 12 an agreed amount of money for an equity share in purchasing the property. The remaining amount of money required to purchase the property is to be wholly funded by the property purchaser 12. Typically, the remaining amount of money will consist of a deposit and a financed component. In a particular embodiment the deposit must be at least 5% of the purchase price. The financed component may be financed using any suitable principal plus interest mortgage (i.e. first mortgage) authorised by the equity provider 14. In a particular embodiment, the term of the first mortgage corresponds to the deferred payment period specified in the agreement. The deferment payment period may be any suitable period agreed between the equity provider 14 and property purchaser 12. In a particular embodiment a maximum deferment period of 15 years may be applicable.

2. That the property is purchased by the property purchaser 12 and, at settlement, the equity provider 14 will acquire an agreed percentage of the property and be noted on the title deed as a 'Tenant in Common' with the property purchaser 12. In addition the TICA is required to be scheduled on the property' s certificate of title (i.e. such that the TICA will show up on a title search and prevent anyone trying to register another interest or dealing on the title) and a caveat is placed on the title to further secure the equity provider's interests in the property .

3. That the property purchaser 12 provides an enduring power of attorney in favour of the equity provider 14 in respect of all dealings in the subject property in the event that the property purchaser 12 defaults on the mortgage. 4. That the property purchaser 12 is responsible for all property outgoings, including: stamp duty at purchase, repairs & maintenance, insurance, rates & taxes and ultimately the selling and marketing costs .

5. That an income and life protection insurance policy be taken out at settlement and renewed annually (i.e. at current full market value) . The policy would cover any relevant property risks as well as income protection and death cover, noting equity provider's interests on the policy. The ongoing annual premium may be paid by the property purchaser to the EQI administrator 10. In a particular embodiment the property purchaser 12 may be required to pay an annual fee which covers the insurance policy payment, as well as items such as regular property maintenance, inspections and valuations.

6. That, at the end of the deferment period (or at any earlier settlement as discussed in subsequent paragraphs), the first mortgage must be discharged (payed out) and the property purchaser 12 either pay out the equity provider' s interest in the property (e.g. through re-financing in full or in part or with a second mortgage) , or sel1 the property.

7. Before sale of the property can take place, a licenced property valuer must value the property and both the equity provider 14 and property purchaser 12 must agree on a minimum sale or reserve price (if sold via auction) before the property can be sold. The valuer will either be appointed by the equity provider or be independently appointed (i.e. such that they do not have any particular ties to either party) . Equally, where the property purchaser 12 is to purchase the property outright, the purchase price must be agreed by both parties 12, 14 before the purchase can take place. 8. After discharging the balance of the first mortgage (if any) the balance of all available equity (or sales proceeds) is distributed as follows:

• Firstly: the initial equity contribution and the full amount of the agreed deferred investment return are paid to the equity provider 14;

• Secondly: a 50% share of any actual or estimated capital gain increase above the deferred investment return is paid to the equity provider 14.

• Thirdly: the remaining balance is distributed to the property purchaser 12.

9. The property purchaser 12 may sell the property during the deferred payment period subject to approval from the equity provider 14. In the case of an early sale, the property purchaser 12 would ask the equity provider 14 to appoint an independent valuer to determine the current market value, and this would become the 'sale price' or 'minimum sale price' on which the repayment transaction would be based. The deferred payment payable to the equity provider 14 will be calculated pro-rata. Should the property sell for a higher price, this higher sale price will become the value for calculation of the repayment transaction.

At step S4, the property purchaser 12 purchases the property.

At step S5 the parties 12, 14 carry out their roles and responsibilities under the TICA agreement.

Worked example

A property purchaser 12 identifies a property to purchase. In this example, the property they are interested in purchasing ha a sale price of $750,000. The property purchaser 12 has a deposit of 5% ($37,500) of the purchase price, plus money for application and legal fees, stamp duty, and other applicable property purchase costs. The deposit may come from savings and any Government assistance, such as the First Homebuyers Grant.

The property purchaser 12 submits an EQI application with the EQI administrator 10 for an EQI. The EQI application is submitted via a mobile application downloaded on their mobile device. The application is subsequently processed and uploaded on the database 122 for subsequent consideration by the

registered equity providers 14.

A registered equity provider 14 views and accepts the EQI application via the equity provider web application. The equity provider 14 and property purchaser 12 agree on essential terms for the TICA agreement, including deposit amount, amount of equity to be provided by the equity provider 14, deferred interest rate, first mortgage details (i.e. for the non-equity funded component) and any other relevant information for the TICA.

In this example, the parties 12,14 agree that the equity provider 14 will have a 45% share in the property, that the deferment period is 15 years and that a deferred investment return rate of 8.8% will be payable to the equity provider 14 at the end of the deferment period (or at an earlier settlement) . The property purchaser 12 applies for a 15 year "first mortgage" over 55% of the property to finance the balance of the purchase price.

The first mortgage is approved and the property purchase is completed. The loan repayments by the property purchaser 12 are as follows : monthly/weekly repayment on first mortgage $2995 / $691 (nb. the estimated weekly rent for an equivalent property is anticipated to be in the range of $735 - $765 ) ; and monthly/weekly investment return to equity provider $0 / $0 (as afore-described investment return payments are capitalised on to the property to be paid at the end of the deferment period together with a 50% share of the properties increase in value above the deferred investment return over the term of the TICA agreement)

At the end of the 15 year deferment period the first mortgage will be fully re-paid and the property purchaser 12 then refinances (or sells) the property to repay the equity

provider 14 the original equity advance, plus all of the capitalised investment returns and capital increase share.

Table 1 below summarises the initial equity payments and returns to both parties 12, 14 based on an annual capital growth of 8.3%

Table 1 Patient Capital

In a particular embodiment the equity may take the form of patient capital which is raised and invested as equity into the EQI arrangement. Patient capital when committed as part equity in a property accumulates a capitalised investment return amount of 8.3% pa (monthly) against the value of the property. The provider of the patient capital (e.g. an Australian

Superannuation Fund) can take the annual 'acuminated' investment return amount onto their annual accounts even though they may not actually receive the cash income. As well as the income from the capitalised investment return, the property purchaser will pay a 50% share of the increase in capital gain above the deferred investment return, which is also capitalised over the deferment period. Further, the provider of the patient capital can have the benefit of depreciation, and other financial engineering mechanisms to increase the IRR.

Further Detail of the TICA Agreement

It will be evident from the above description that the TICA does not include the property purchaser' s mortgagee as a party thereto, but shall refer to the mortgage being met as a

principal condition of the agreement. The mortgagee would acknowledge the existence of the TICA.

In an embodiment the TICA is drafted such that the equity provider 14 has first right of refusal (or veto) over any sale price, terms and conditions to protect their interests. As previously mentioned, the equity provider 14 also has an enduring power of attorney to allow the equity provider 14 to have exclusive dealings with the subject property in case of default by the property purchaser 12.

In an embodiment the TICA is drafted to allow the equity provider 14, in the case of default under the mortgage, to discharge the mortgage and take over the full ownership of the property. This action extinguishes the right to sole occupancy enjoyed by the property purchaser 12.

In an embodiment the TICA is drafted to nominate certain

'trigger clauses' so that the above action can be carried out. In the case of a default under the property purchaser' s first mortgage this would mean that the property may not go to auction, but will allow the equity provider 14 to pay out the outstanding first mortgage (take further recovery action again the property purchaser to recover any outstanding monies owed under the previously defaulted mortgage), take occupation as owner and to then tenant or refurbish and resell the property under more favourable terms than would otherwise be the case. If at the end of this process there is any surplus left after the equity provider' s costs and agreed rate of return, that surplus could be returned to the property purchaser per the spirit of the original agreement.

In an embodiment the TICA is drafted so that the property purchaser can, with the permission of the equity provider, make improvements to the purchased property. This could be funded personally by property purchaser or from a further advance from the equity provider. .

In an embodiment the TICA is drafted so that if the property does not sell the property purchaser 12 must continue to service the first mortgage. The property purchaser 12 cannot compel the equity provider 14 to take over the property at any time.

Exit strategies

As previously mentioned, when the property purchaser 12 decides to sell the property, consent will have to be obtained from equity provider 14 and a selling price agreed upon. This would be confirmed by independent valuation. The following scenarios are the most likely methods that a subject property will be sold . Selling the property into the open market - by private treaty or auction :

A licensed valuer appointed by the equity provider 14 will assess both the property offered and the current market

conditions and provide a minimum recommended price for sale to both parties. The property purchaser 12 and equity provider 14 will agree to the minimum reserve or sale price. After

contracts for sale are prepared by the property purchaser' s solicitor and consented to by the equity provider, the property would be listed for sale with one or more agents and all offers submitted and agreed to by both parties 12, 14. A jointly agreed reserve would be set before any auction. Both parties would have to sign the contract for sale and at settlement the proceeds of sale would be distributed according to the TICA.

Sell the property as another affordable housing property:

The property will be independently valued to market, and the property purchaser 12 and equity provider 14 will agree to the sale price. The property can then be sold to another affordable housing applicant. At settlement the proceeds of sale would be distributed to the equity provider 14 and property purchaser 12 according to the TICA. Should the equity funder introduce the new buyer or new property purchaser, the equity funder may charge an agent fee or other fees to the existing property purchaser .

Purchase by the Householder for own use:

The property, once valued to a market valuation could be purchased by the property purchaser 12 by paying out the equity provider 14 in accordance with the TICA, and assuming full ownership of the property. The property purchaser 12 will be responsible for the legal costs of both parties and stamp duty and any other taxes, duties and transaction costs, etc. Mortgagee Sale :

In the case of default by the property purchaser 12 on the first mortgage, the equity provider 14, under the terms of the TICA can, but is not compelled to, take over (and discharge or otherwise renegotiate) the mortgage and assume full ownership of the property. Alternatively in the case of the property purchaser' s default under the first mortgage (which is also a default under the TICA) the equity provider 14 can let the mortgagee's auction take place.

Extra service offerings provided under the EQI arrangement In an embodiment the EQI arrangement offers a financial

assistance service to the property purchaser (e.g. for an annual fee) to help where there is any risk of the equity loan

transaction failing. The type of assistance includes: Advice if the mortgage payments fall behind, and applications that need to be made for Government assistance; household budget advice and mentoring; advice on renting the property to maintain the mortgage repayments; advice on the steps required to resell the property and local property values; advice on any maintenance issues or claim under the builders warranty insurance

In an embodiment the EQI arrangement offers the equity

provider 14 a property purchaser follow up service, which will in the event of a default, refurbish and resell or rent for a period of time, so that the property can recover any outstanding balance owing. The service may also include an annual or biannual valuation for the purposes of apportioning capital growth; arrange for 'drive-by' property inspections to be carried out for monitoring the maintenance and condition of the asset; follow up conformation of up to date council rates and insurances; among other services.

PP increasing Before a mortgage can be increased, or any mortgage on property additional encumbrance put onto title, it will or encumbering the have to be agreed to by the EP who will be property registered on the title. There can be no

dealings on the property title without the consent of all the property owners. This safeguard protects the EP' s equity. Any application for an increase in the mortgage could be dealt with on a case by case basis.

Long term occupancy There is a fixed term 'sunset' clause in the by PP TICA which requires that EP has to be repaid in full at the end of the period. To accomplish this, the PP chooses to either sell the property of re-finance the payout EP share at the then current market valuation.

Failure by PP to The renewal of the public liability policy insure property for noting both parties & property insurance may be public liability renewed by EAHPP, annually. The cost of this may be covered by an annual service fee paid by the PP. In case of default, the EP could renew the policy and recover the cost from the PP or add it to the PP ' s liability. It is also possible that an insurance policy covering the required property insurance could be set up and paid monthly by the PP.

Dispute over sale The valuation can be referred to the Institute price valuation of Valuer's for expert arbitration. To protect against such a problem arising, the TICA can be drafted with a provision to appoint a valuer acting for the EP, whose opinion would take precedent over that of the PP. PP rigs re-sale to The proposed sale price must be submitted and "friendly' purchaser agreed to by EP prior to sale or Auction. EP will have first right of refusal of any sale price terms or conditions .

Purchaser The contract for sale will have to be signed by deliberately lets both equity holders.

the property fall

into a state of

disrepair to try and

devalue it prior to

a sale.

Percentage split of See above.

equity

Increase in interest Also EP' s position is protected by the TICA and rates has the option of taking over the property and later resold.

In a particular embodiment, the EQI arrangement could be

implemented such that EQI applications are pooled and sold as an investment vehicle to one or more equity providers . For

example, a pool of applications could be offered to an equity provider in the form of a super fund that can take on the pool of applications as part of their fund portfolio. It will be understood that the applications could be pooled in any desired arrangement, e.g. depending on risk, value, etc. In a

particular embodiment, a fee may be paid to the EQI

administrator 10 for purchasing a pool of applications, with the fee being structured in any suitable format (e.g. a one off fee, an ongoing fee payment, etc.) . The value of the fee may var e.g. be commensurate with a value of the pool, etc.

In an embodiment, the equity provider may allow the pay down or pay out of its cumulative equity interests or entitlements at any time. According to such an embodiment, at such a time, a valuation of the property will be undertaken and used as part of the cumulative entitlement calculation of the equity provider' s interests. Residual amounts and obligations in respect of each party will continue and accumulate for the adjusted quantitative balances subsequent to settlement of pay down of the equity provider' s interests and for the balance of agreement or program term.

In another embodiment, the equity provider may arrange

insurance, underwriting, shortfall guarantees or other

protection over the equity capital invested or contributed to the co-funding arrangement and return entitlements . This underwriting facility or mechanism is intended to protect the equity provider's initial capital and/or cumulative equity or return interests in the co-funding arrangement. Arrangements and agreements will be established with parties using combinations of facilities and structures including but not limited to:

utilising insurance mechanisms, guarantees, security deposits, asset backed facilities, promissory instruments, options including put or call options, derivative or synthetic financial products to protect the interests of the equity capital

provider .

Further Detail of System Configuration

The server 112 can be any form of suitable server computer that is capable of hosting suitably programmed web applications for communicating with property purchasers 12 and equity

providers 14 via their respective computing devices. The server 112 may include typical web server hardware including a processor, motherboard, memory, hard disk and a power supply. The server also includes an operating system which co-operates with the hardware to provide an environment in which software applications can be executed. In this regard, the hard disk of the server is loaded with a processing module which, under the control of the processor, is operable to implement engines for delivering the afore-described applications . In an alternative embodiment, the computer platform may be implemented as a cloud based application (i.e. in a secure web based cloud

environment) , using techniques which will be well understood by persons skilled in the art.

At least one of the following advantages arises through

implementing one or more embodiments of the invention as described herein:

The TICA may be structured such that mortgage repayments on the first mortgage are similar to or less than market rent for an equivalent property; The property purchaser is able to build equity in their property, rather than paying out 'dead' rent money; Less financial stress on the property purchaser and their family due to reduced monthly mortgage payments than would otherwise be payable for a conventional mortgage .

The property purchaser can access property that would normally be out of their reach, providing the opportunity to live in areas closer to their work or family;

As the mortgage repayments on the first mortgage are similar to or less than market rent for the equivalent house, if the property purchaser gets into trouble, the property can be rented, which will cover the mortgage cost until they can get back on their feet. This fact alone removes much of the risk out of the transaction for the equity provider;

Insurance stipulated by the TICA assists in protecting the equity provider' s capital as well as the property and provides the property purchaser with income and life cover;

Because the first mortgage is only 50-55% of the property's value, the property purchaser will suffer less financial stress if interest rates rise; With all workers now having the advantage of compulsory superannuation in Australia, the property purchaser' s assets are spread, so they do not have to have all their wealth residing in a single residential property. They have other funds invested;

The equity provider' s return is from the agreed rate of return, the share in capital gain, and the depreciation and tax benefits available, plus any financial leveraging that may be applicable;

In a particular embodiment the equity provider' s share is 45% of the property's value, but the capital growth will be taken from 100% of the property's value, so there only has to be an annual increase of about the inflation rate for the equity provider to break even; Existing first homebuyer grants and stamp duty concessions may still apply to any qualified property purchaser;

The capitalization of investment return on the equity component has no "cap' and can be added to the equity capital growth share;

The property purchaser may be able to secure a better mortgage deal (i.e. in respect of the first mortgage) than they would if applying for a mortgage without the equity, potentially resulting in lower repayments and making the transaction more secure for all parties; Depreciation is available on the property asset;

The equity amount provided by the equity provider can securitised;

According to the illustrated embodiment, the purchaser and equity provider computing devices take the form of general purpose network enabled computers equipped with a browser. It will be appreciated, however, that the devices could be any suitable form of network-enabled computing device. For example, the devices may take the form of a special purpose device including a smart phone, tablet, or the like. Details of such devices (e.g. processor, memory, displays, data storage devices are omitted for the sake of clarity.

While the invention has been described with reference to the present embodiment, it will be understood by those skilled in the art that alterations, changes and improvements may be made and equivalents may be substituted for the elements thereof and steps thereof without departing from the scope of the invention In addition, many modifications may be made to adapt the invention to a particular situation or material to the teaching of the invention without departing from the central scope thereof. Such alterations, changes, modifications and

improvements, though not expressly described above, are nevertheless intended and implied to be within the scope and spirit of the invention. Therefore, it is intended that the invention not be limited to the particular embodiment described herein and will include all embodiments falling within the scop of the independent claims .

In the claims which follow and in the preceding description of the invention, except where the context requires otherwise due to express language or necessary implication, the word

"comprise" or variations such as "comprises" or "comprising" is used in an inclusive sense, i.e . to specify the presence of the stated features but not to preclude the presence or addition of further features in various embodiments of the invention.

Claims

THE CLAIMS DEFINING THE INVENTION ARE AS FOLLOWS:

1. A method for providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising the steps of:

the equity provider and property purchaser enter into a tenants in common agreement (TICA) in relation to the property, the TICA including the following terms:

that the equity provider provides an amount of money for use by the property purchaser in purchasing the property and whereby a remaining amount of money required to purchase the property is funded by the property purchaser;

that the property is purchased with the property purchaser and the equity provider being recorded as tenants in common on the title deed; and

that, at the end of a stipulated deferment period, the property purchaser:

returns to the equity provider the amount of money that the equity provider initially provided for the purchase together with a deferred equity investment return payment in respect thereof, as well as a share in the capital gain.

2. A method in accordance with claim 1, wherein the capital gain is the capital gain for the property since the property was purchased, or the capital gain above the deferred equity return investment, whichever is greater.

3. A method in accordance with claim 1 or 2, further comprising the step of scheduling the TICA on the certificate of title and whereby the step of scheduling is an additional term of the TICA.

4. A method in accordance with any one of claims 1 to 3, further comprising the step of lodging a caveat such that the equity provider' s interest in the purchased property is covered by a caveatable interest.

5. A method in accordance with any one of the preceding claims, wherein the TICA additionally requires that the property purchaser provide a deposit for use in purchasing the property and whereby the remaining amount minus the deposit is financed by way of a principal plus interest mortgage.

6. A method in accordance with claim 5, wherein the deposit is at least 5% of the purchase price.

7. A method in accordance with claim 5 or 6, wherein the

TICA additionally requires that the term of the mortgage corresponds to the term of the deferment period.

8. A method in accordance with any one of claims 5 to 7 , wherein the TICA additionally requires that at the end of the deferment period the property purchaser either sell or purchase the property outright such that the equity provider no longer has a recorded interest in the property.

9. A method in accordance with claim 8, wherein the TICA additionally requires that an independent licenced Valuer value the property prior to the sale/purchase and whereby both the equity provider and property purchaser must agree on a minimum recommended sale or reserve price before the sale/purchase can proceed .

10. A method in accordance with claim 9, wherein, in the event that the property purchaser wishes to sell/purchase th> property before the end of the deferment period, the TICA additionally requires that the equity provider agrees to the early sale .

11. A method in accordance with any one of the preceding claims, wherein the TICA additionally requires that the property purchaser is responsible for property ownership costs during the deferment period.

12. A method in accordance with any one of the preceding claims, wherein the investment return rate payable on the amount of money provided by the equity provider is between 3 to 12% p/a.

13. A method in accordance with any one of the preceding claims, wherein the investment return rate payable on the amount of money provided by the equity provider is between 8 and 9% p/a.

14. A method in accordance with claim 12, wherein the investment return rate payable on the amount of money provided by the equity provider is 6.5%.

15. A method in accordance with any one of the preceding claims, wherein the TICA additionally requires that an insurance policy be taken out by the property purchaser.

16. A method in accordance with claim 15, wherein the insurance policy is a life protection and/or fire and genera all risk insurance policy.

17. A method in accordance with any one of the preceding claims, wherein the amount of money provided by the equity provider is between 10% to 55% of the purchase price.

18. A method in accordance with claim 17, wherein the amount of money provided by the equity provider is 45% of the purchase price .

19. A method in accordance with any one of the preceding claims, wherein the deferment period is between 3 years to 20 years .

20. A method in accordance with claim 19, wherein the maximum deferment period is 15 years.

21. A method in accordance with any one of the preceding claims, further comprising the property purchaser electronically submitting an electronic equity loan application in respect of the property with an equity administrator system and whereby the equity provider can access and approve the electronic

application and wherein following the approval the property purchaser and equity provider enter into the TICA.

22. A method in accordance with claim 21, wherein the equity administrator system provides an electronic template which can be accessed by both the property purchaser and equity provider to prepare the TICA.

23. A computer readable medium implementing a computer program comprising at least one instruction which, when

implemented by a computer system, is operable to carry out the method in accordance with any one of claims 1 to 22.

24. A system for providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising:

a database storing at least one equity loan application for equity assistance toward the purchase of a property by a property purchaser; and

a computer application for allowing equity providers to review and selectively approve the equity loan applications and whereby following approval of an equity loan application the property purchaser and equity provider enter a TICA agreement as claimed in any one of claims 1 to 22.

25. A system for providing equity assistance by an equity provider toward the purchase of a property by a property purchaser, comprising:

a database storing at least one equity loan application information; and

a computer application for access by equity providers t review details associated with equity loan applications for which they have contributed equity.