Patent AU-2017100976-A4 (AU)
Title: A method for funding home loan deposits which negates the need to pay Lenders Mortgage Insurance (LMI) or lender risk fees by providing a deposit loan to reduce the Loan to Value Ratio (LVR) of the primary lender loan. The innovation is a more cost effective and flexible solution for borrowers, and offers lenders the ability to fund lower LVR deals. In addition, the innovation provides for a method to monitor asset value, owners’ equity and borrower serviceability to automatically advise and match borrowers and lenders to finance or refinance loans.
Inventor: HERDAN DAVID ERROL
IPC: G06Q40/02
Filed: 2017-07-18
Granted: 2017-08-17
Abstract: Lenders providing loans at a high LVR force borrowers to pay a risk fee, traditionally being Lenders Mortgage Insurance (LMI), but also could be in the form of a lenders internal risk fee. These fees are capitalised to the primary loan, thereby increasing the outstanding loan principal. The risk fees depend to a large extent on the LVR and loan size, but additional loading may also be applied by the lender and the Mortgage Insurance Provider. The fee could be as high as 4%-6% of the loan amount. These fees effectively represent an immediate decrease in borrower equity on day one of the loan and benefit the lender only, with no benefit to the borrower. Furthermore, these loans limit the borrower's ability to change loans to a lower rate, as they have 'invested' in the risk fee. Moreover, to change loans, borrowers may have to pay risk fee again, and because the risk fee has been capitalised, their LVR may be even higher than it was on the original loan. LMI or risk fee loans are therefore a sunk cost and lock the borrower into that loan. The proposed product, termed a Delayed Deposit Mortgage or DDM TM offers a flexible deposit loan that part funds the deposit by providing an Interest Only, fixed period loan (Typically 5 years), and shares in the capital gain of the property. The borrower can elect to have a minimum capital appreciation fee to reduce the interest rate charged on the deposit loan. The proposed system provides an online and automated approach to monitoring property valuations, owners' equity in properties, and borrower affordability to advise on refinancing loans. The loan is flexible, and can be repaid at any time to minimise the capital appreciation that may be shared with the deposit loan provider. In limited circumstances, the DDMTM may turn out to be more expensive, but the borrower would have enjoyed flexibility in their primary loan, and the ability for early repayment when the property appreciates in value. Property Value: $im 5-Year property Value $1m (no increase) Primary Lender Loan $800K @ 4.0% (25 yrs) Staircase CAF $0K + $120K Principal Customer Deposit $80K Principal Outstanding to Main Lender: $696.837 Staircase Loan $ 120K @ 12% Repayments: $4,223 pm to Bank and $1200 Refinance: Bank $816.837 @ 4.0% pm to Staircase LVR now. 817% 1 Repayments $4,050 (20 Years) Final Repaymen ~~~(or rollover) FnlRpyet7 Property Value: $1m 5-Year property Value Sim (no Bank Repayments continue @ Primary Lender Loan $959,772 (including increase) $6,335 (20 Years) $39.772 of LMI @ 4.5% (25 yrs) Principal Outstanding to Main (or rollover) Customer Deposit $80K Lender:.$843225 Repayments: $5,335 pm to Bank Figure 1 - Example without capital gain Property Value: $1m 5-Year property Value $1.16m (3% pa increase) Primary Lender Loan $800K @ 4.0% (25 yrs) Staircase CAF: $19,394K + $120K Principal Customer Deposit $80K Principal Outstanding to Main Lender: $696,837 Staircase Loan $120K @ 12% Repayments: $4.223 pm to Bank and $1200 Refinance: Bank $836.231@ 4.0% pm to Staircase LVR now: 72% 1 Repayments $5067 (20 Years) Final Repaymen ~~~(or rollover) Fia eamnt Property Value: $1m Principal Outstanding Refinance: Bank $84;3,225 @ 4.0% Primary Lender Loan $959,772 (including to Main Lender: Repayments $5,110 (20 Years) $39,772 of LMI @ 4.5% (25 yrs) $843.225 (or rollover) Customer Deposit $80K LVR now' 72.7% Repayments: $5.335 pm to Bank Figure 2 - Example with a capital gain