Introducing Equity Income: Zero Interest Loans Tailored for Australians Over 50 and Retirees. Here's How It Works:

Introducing Equity Income: Zero Interest Loans Tailored for Australians Over 50 and Retirees.

As your gateway to a secure and worry-free financial future, Equity Income enables you to enjoy your golden years with dignity and without compromise. Unlock unparalleled financial flexibility with our exclusive No-Interest Equity Release Loans, designed explicitly for Australians aged over 50 and retirees. 

Home Preservation

We're dedicated to fostering inter-generational wealth. Our mission is to enable individuals to maintain 100% ownership of their valuable assets, such as their homes, without the need to downsize or sell, even during transitions to Aged care homes.

Supplementing Pension Income

Enrich day-to-day living standards by supplementing pensions and other income sources. Our bespoke no-interest equity release income solution offers up to $40,000 in annual income, complementing any Aged Pension entitlement.

Providing Immediate Funds

Access funds for pressing needs, alleviating the stress associated with emergency or major one-off expenses, such as vehicle maintenance, home renovations, or debt management.

Get to know us

Unlock financial flexibility with our innovative Equity Release solution. Residential property owners can leverage their property to secure cash payments, which are then converted into a No-Interest Loan. This tailored offering allows for easy access to funds without impacting your property ownership. Discover how our solution can help you achieve your financial goals while maintaining control over your assets.

This unique offering is a no-interest loan secured against your nominated property asset, which will be crystallised against the Future Sale Value of the property used as security when you or your Estate elect to opt-out.

This unique offering is a no-interest loan secured against your nominated property asset, which will be crystallised against the Future Sale Value of the property used as security when you or your Estate elect to opt-out.

Key Benefits:

No Interest Repayment

An unconventional and interest-free alternative to traditional lending, with no compounding interest.

Guarantee Distribution

Guaranteed income distribution, available through monthly or discretionary drawdowns.

No Risk of Equity Erosion

Manage equity erosion by capping principal repayment at maturity to the face value of the distribution and a restricted portion of future growth.

Equity is the market value of an asset, such as a house or property, less any outstanding debt owed. Our Equity Release program allows residential property owners to deposit their real estate property as security in exchange for securitising cash payments against their house. 

Here’s a simplified process flow for the Equity Release program:

Application Submission:

  • Contact us to discuss your needs and preferences. Once you’ve decided, you can apply to join the Equity Release program.

Property Valuation:

  • You choose whether to use one of our valuation assessors or your own to assess your property’s market value.

Distribution Determination:

  • After a successful valuation, we confirm the financial arrangements and the amount to pay you—whether it’s a lump sum, regular payments, or both—based on your property’s market value.

Approval and Participation:

  • We’ll place a security charge on the property upon approval and agreement to participate, indicating our interest when you decide to exit.

Payment Options:

  • Depending on your property’s equity, you can elect to receive a lump sum and/or regular payments.

No-interest Loan Conversion:

  • The cash payment you receive will be converted into a no-interest loan, secured against the Future Sale Value of the property.

Repayment:

  • You can repay the no-interest loan at your discretion when the property changes ownership, generally when you sell it, opt out of the program, or transfer it to your Estate.

Repayment Calculation:

  • The repayment value is calculated based on the new property valuation on exit. The percentage change in the property value will be used to determine the repayment as follows:

 

Ei’s Percentage Share of Growth   =    (Total Money Received   x  100% ) x Realised Capital Growth

                                                                            Initial Asset Value

 

Australian residents aged 50 years or older who own and reside in the residential property being offered as security. Borrowers must be the same person as the security asset owners.

Where there are multiple applicants, all applicants must be 50 years of age or older and hold title to the property as either joint tenants or tenants in common. At least one of the applicants must reside in the property at the time of application. 

Your participation in the Equity Release program will end when:

  1. You choose to opt out;
  2. Your property is sold – to an unrelated party to the agreement; or 
  3. Your property changes ownership, e.g., as part of your Will or Estate. 
  4. Note the minimum term is 10 years unless specified otherwise in a ‘Fix and Flip Equity Release’ contract.

When this occurs, the Final Market Value of the property will be agreed as the current valuation as determined by one of our accredited assessors or the sale price.

Illustrative Example 1: Realised Capital Growth Calculation of Equity Income Total Payout Entitlement:

If Total Money Received over 10 years is $400,000; Suppose a property initially valued at $1 million sells for $1.8 million in 10 years. Total payout will be calculated as follows:

  • Equity Percentage Share  =   (Total Money Received / Initial Asset Value)  x  100%
  • Equity Percentage Share  =   ($400,000 / $1,000,000) x 100% = 40%
  • Total Money Received or the Total Distributed income at $40,000 per annum over 10 years is $400,000; plus
  •  

Equity Income Entitlement calculated based upon:  

  • The Realised Capital Growth = $800,000
  • Equity percentage share = 40%
  • Apply participation discount for the 10 years e.g., 10% if property value increase over 70%, therefore:
    • $288,000 which is calculated as per the following formula:
    • [(Realised Capital Growth x 90%) x TED Equity Percentage Share]
    • [($800,000 x 90%) x 40%] = $288,000

 

Illustrative Example 2: No Capital Growth Example:

If Total Distributed Income or Total Money Received before exiting the program is $400,000. Suppose the initial Market Value based upon a Borrower’s) initial real estate valuation was $1 million, the asset sells for $1 million, i.e., there was no capital growth, and the Final Market Value after 10 years remains unchanged. 

The total payout to Equity Income will follow this calculation:

  •  If Total Money Received = $400,000;
  • Equity Income Percentage Share  =   ($400,000 / $1,000,000) x 100% = 40%;
  •  

Total Repayment is calculated as per the following formula:

  • [(Final Market Value – Total Money Received) x 40% + Total Money Received (Principal)]
  • [($1,000,000 – $400,000) x 40% + $400,000)]
  • $240,000 + $400,000 = $640,000

 

 

Why Equity Income?  

Maintain Current Living Standard

 

With our Equity Release program, we offer a solution for clients to enhance their current lifestyle, encompassing:

  1. Retaining their security asset, typically their lifelong home, providing the flexibility to choose whether to downsize or move to an Aged care facility.
  2. Sustaining their day-to-day lifestyle expenses by supplementing pensions and addressing other income shortfalls.
  3. Funding immediate objectives and alleviating the burden of sourcing funds for emergencies or significant one-time expenses, such as vehicle maintenance, home refurbishments, or debt management.

Financial Independence and Peace of Mind

 

It is an option for individuals without family support, offering a financial solution to those who choose to leverage their home equity for extra income rather than relying on family assistance and potentially accumulating substantial debt.

Achieving a Better Quality of Life

 

The additional income can provide a comfortable financial cushion since the Aged Pension, even with supplementary income, is often considered insufficient for a fulfilling lifestyle in retirement.

Short-term Finance

 

It is a temporary financing solution, providing liquidity before selling a major asset or completing significant renovations. It can also assist in covering upfront residential accommodation deposits, facilitating a gradual transition to aged care while awaiting the sale of their home.

Downsizing Benefits

 

Individuals often strongly prefer to remain in their homes, finding the idea of selling or downsizing for financial reasons unacceptable due to familiarity, emotional attachment, and a desire to continue residing in their homes. Our program addresses these concerns, providing participants additional options and facilitating their decision-making process.

Limitation on Upfront Payment

 

An option for individuals seeking to address ongoing living expenses and improve their quality of life. However, it may not completely meet the needs of participants needing a more significant upfront lump sum drawdown exceeding our risk parameters—specifically, more than 50% of their security asset value. The availability of higher drawdown amounts is subject to the value of the security asset.

Draw Forward Lump Sum Exemption and Fix and Flip Options

 

We provide draw-forward exemptions for Borrowers who require substantial drawdowns for various purposes, including:

  • Fix and Flip: Renovations for property improvement.
  • Emergency Repairs and Maintenance: Swift resolution of unforeseen property issues.
  • Emergency Medical Expenses: Financial support for urgent healthcare needs.
  • Concrete Cancer: Remedial work to address concrete degradation.
  • Combustible Cladding: Assistance in dealing with cladding-related issues.
  • Other Critical Events: Tailored support for specific unforeseen circumstances.
  •  

The maximum exemption amount is 25% of the security asset value. If insufficient, Equity Income can collaborate with you and your nominated construction company to devise a suitable payment plan.

Alternative to Standard Home Loans for Individuals with Low to No Serviceability

 

Borrowers are not obligated to make any repayments during the loan term. The repayment amount is determined and collected only upon the sale of the real estate asset or transfer of ownership to a non-resident member or the Estate.

Retirement Planning Benefits for Pre-Retirees

 

 

Our program offers pre-retirees an opportunity to engage in retirement planning strategies, including salary sacrificing, to bolster superannuation savings while supplementing income through our solutions. Salary sacrifice involves allocating a portion of pre-tax income to superannuation, offering a tax-effective approach suitable for middle to higher-income earners.

No Negative Equity

 

The No Negative Equity Guarantee option ensures that participants will not be required to repay an amount exceeding the total drawdown principal plus a margin, all secured against the equity held in the property used to secure the loan.

 

Rights of other People Living in the Home

 

The rights of any spouse, partner, or other residents living in the home are protected under the agreement even if the principal applicant moves into an Aged care accommodation. Equity Income exercises its rights only when the asset is sold or transferred to an Estate, such as independent children. While the consequences for non-participating residents are considered, the principal applicant must declare this to Equity Income before entering into the contract.

Protection against the Risk of Equity Erosion

 

Equity Income minimises the risk of equity erosion by capping the principal repayment at the total Face Value of the distribution to the Borrower and a restricted share of potential capital growth. In instances of low to no capital growth, an alternative entitlement calculation is applied, and full disclosure is provided upfront.

No Risk of Compound Interest

 

Regardless of the size of income distributions made during the term of Equity Income’s Home Equity Release program, there is no risk of compounding interest. Principal repayment is capped at the Face Value of the total cash distributions to the Borrower, supplemented by our Entitlement, representing a portion of potential future capital growth if realised. Otherwise, an alternative matrix determines our Entitlement.

Non-Recourse Guarantee

 

Equity Income only has recourse over the nominated security property asset and cannot access any other asset of the Borrower not provided as collateral in the contract. This implies a limited recourse loan, meaning that Equity Income, as a non-bank lender, is restricted to a specified collateral, offering protection to the Borrower’s additional assets.

No Interest Repayment Guarantee

 

No interest repayment guarantee means there is no interest repayment obligation on the Borrower for as long as they retain ownership of the security asset. A borrower could live in their home or move into an Aged Care home and retain ownership of the security asset. The trigger event for repayment is by selling the security asset or when there is a change of ownership or title.

Guarantee Distribution

 

Our clients are entitled to a guaranteed income distribution through our Equity Release program. This monthly or discretionary drawdown amount will continue at the discretion of the Borrower as long as they retain ownership of the house and remain within the 50% LVR cap.

Distribution and Lump Sum Drawdown Caps 

 

Total income distributions and lumpsum drawdowns are capped at 50% of the value of the security asset (real estate asset), safeguarding Borrowers’ assets and ensuring Equity Income provides negative equity protection.

Borrowers are not required to make a cash contribution, and their exposure is limited to 50% of the equity in their home or nominated asset. Equity Income provides income distributions and lump sum payments within specified limits.                                  

Tenancy Protection Provision

 

The tenancy protection provision in our agreement ensures that individuals, aside from the Borrower (non-borrower residents), have the right to occupy the security property in extraordinary events, such as the death of the principal participant (Borrower). Nominated persons must be declared at the application stage, especially in cases involving dependent adults or special-needs children residing with the Borrower(s). In such instances, we collaborate with the Borrower to ensure their family’s protection.

Tenancy protection does not apply if the Estate sells the asset or if a non-resident, not initially declared in the contract, moves into the nominated property following the passing of the Borrower.

Our unique approach to equity-release loans mitigates common concerns related to compounding interest and potential negative equity erosion and addresses historical issues associated with traditional reverse mortgage products.

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Market Landscape

The aging Australian population is fueling a growing demand for innovative equity-release products. Australians aged over 65 collectively possess over $500 billion in home equity, with many owning their homes outright. However, despite substantial wealth tied up in home equity, many retirees lack adequate passive income to fund their retirement lifestyle, leaving only a limited portion on track for a comfortable retirement.

Challenges in the Reverse Mortgage Market

Common risks include the absence of a negative equity guarantee, potential equity erosion, tenancy protection concerns, and issues related to unfair contract terms.

Our Solutions for Australians age 50 and above and retirees

Equity Income (Ei) enables clients to engage in a transformative and socially responsible financial structure that safeguards their interests by addressing common negative perceptions and offering a secure and innovative personal lending solution.