Wizard has been advocating the concept of Shared Equity Loans, but nothing ever came from it…
Is there a shared equity product out there?
Anyone interested in such a deal[?]Sorry for all the dumb questions folks… I have been following the forums with interest, trying to learn something.[
]As long as I can afford to do things without sharing, I will do so. From memory, Shared Equity was a response to the rising value of property and was about going part risk part reward with the lender.
The only problem i think is that the lender takes most of the reward and little of the risk.
Josh
Hi James,
It’s a wrap in disguise.
Not dumb at all. You should see some of myquestions !!
Shared equity describes something that I thought of some time ago. I wondered why the lending institutions had not thought of it earlier. If they lend so readily, then why not get two bites at the cherry with direct ownership in capital growth, particularly over the past four years.
I guess they see it as the same as wrapping a client. Politics have most likely averted their creativity.
Kind regards, Phil
Have got a feeling that Sweden has some sort of equity sharing system and perhaps other countries do too. The aim of this system is to make property cheaper but I would have thought that it would made prices higher. Economically supply and demand determine prices and so if you increase demand by paying for half of the house then prices would increase dramatically. If the equilibrium price is $100000 as that is what the average person can pay and what vendors will accept and then the bank, managed fund etc says they will match that then wont the new equilibrium price be $200000 when vendors get wind of the new situationas buyers will still have $10000 to spend? Perhaps I haven’t explained it very well but that is what I think should happen economically.
I don’t think I’d go for an equity deal with a bank! The figures I saw said that they covered 30% of the purchase price (say $30K for a $100,000 place), but took 60% of the value down the track (say $120K to your $80K if the property values at $200K. You pay in $70K, and get $80K back – no thanks!)
Cheers
MelEdited after seeing Craig’s comments.
PP is $100K. You put up $70K. Now valued at $200K, so the bank takes their $60K cut of that.
You end up with $110K, bank has $90K. Still doesn’t look good to me, although a little better than my initial figures!I think from memory is was 60% of the capital gain. + their initial 30% investment
Just think of those cheap renovations you could do when the bank has to cough up 30% of the costs. (hmmm how likely is that?)
Craig
NZ Property Investing News
http://www.Landlords.co.nzHi. i think Wizard were just playing around with the idea (and getting some publicity) and nothing actually came of it.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I wonder if you did a shared equity deal then how much say do you have when you decide to:
Knock out a wall
add a room
add a pool
paint
add a deck
landscape
move and rent it out?Surely this would all have to be passed by the lender for approval?
Sounds like the lender has potential to be too involved with your life.
Also do they help with:
Insurance costs?
Maintanence costs?
If they have 30% equity they should wear 30% of the costs.Just thinking out loud.
riff.
What the mind of man can conceive and believe, it can achieve.
From the Wizard website, dated 16 July 2003:
Wizard has been advocating the concept of shared equity loans and recently the media have misunderstood this as Wizard actually launching a shared equity product. Wizard has not launched an equity finance product. Such a product would take a minimum of 12 months to test and develop.In the flurry, many reports claimed that Wizard has already launched such a product. In fact, we have not. We have however, committed to researching the feasibility of such a product.
Equity finance won’t appeal to everyone, but it has the potential to help aspiring homeowners to go into a partnership arrangement with an investor so they can achieve home ownership.
It’s only early days and a lot more work needs to be done to ensure such a scheme would be fair and equitable to all parties, consumers, investors, lenders.
etc etc.
No, I don’t work for Wizard or have any ties to Wizard!
What I read in the newspapers about this was that the lender’s would put in the initial 30% to enable you to buy the place, take 60% of the CG as Mel said but would not contribute to any ongoing costs or any renovations that you wanted to do. That would all be at your cost. Didn’t sound like a good deal to me. Still, if you planned to stay in the place forever and weren’t planning to ever sell, then it would be worthwhile.
I would be more for it if they only took 30% of the CG, not 60%. I don’t see that as fair.
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