www.banksiagroup.com.au
Investments & Loans
Accommodation
Bond Loans
Introduction
The move into residential aged care for older people who feel they can no longer manage at home is often an overwhelming experience not only for the care recipient but also for their families.
While making the move will ensure you get the care you need, entry into a residential care facility can involve a significant rearranging of your financial affairs. Perhaps the largest financial issue to consider is how to fund the accommodation bond payable on entry to your preferred aged care home.
In the past, the funding of the accommodation bond has been achieved through either selling of the family home or by relying on the financial support of family members. This can be a stressful and emotional experience particularly if you need to make quick decisions about moving into care and don’t want to be rushed into selling the family home. Banksia Mortgages Limited is pleased to offer its Accommodation Bond Loan specifically designed to give you the power to access some of the equity locked up in your home, releasing the funds you need to meet the cost of the bond and giving you more time to better arrange your financial affairs. Accommodation bond funding can be very complex, which is why we insist that all customers get
both financial and legal advice to ensure the best outcome for their circumstances is achieved. If you do not have a financial advisor specialising in this area please contact us and we can help identify a suitable independent representative for you.
About the Fund Manager
Banksia Mortgages Limited (BML) ABN 36 087 342 238 AFSL 227733 is a member of The Banksia Financial Group which was formed in 1999 through the amalgamation of a number of long established and successful Victorian based debenture companies and contributory mortgage funds. Banksia offers a substantial business offering investments to the public,
mortgage fund management and mortgage origination and servicing. Staff are
Accommodation Bond Loans
Features that make our
Accommodation Bond Loan unique.
An accommodation bond loan is designed to cover the cost of moving into aged care. The key features of the Banksia product are: • It Is Not Age Dependent
Unlike most equity release products our
Accommodation Bond Loan is not age dependent. As long as you are over 70 years of age you can borrow up to 50% of the agreed value of your home over a three year term or 40% of the agreed value of your home over a five year term. • Flexibility
We know that for many people the family home is their single largest asset. To enable you to access the portion of your equity in the home that best suits your needs we offer two options.
• No Ongoing Monthly Fees Or Charges Our Accommodation Bond Loan has no ongoing monthly fees or charges. • Competitive Rates
Our interest rates are very competitive. Interest rates rise and fall over time in line with markets. Your adviser will have a copy of our current interest rates for your information, or you can visit our website www.banksiagroup.com.au/
accommodationbondloan for the latest information. • No Negative Equity Guarantee
Even though you can borrow up to 50% of the value of the property you will receive a no negative equity guarantee. This means that whatever happens to interest rates or house prices the amount you owe on your loan can never exceed the value of the property as long as you comply with the loan’s standard terms.
For example if you choose option 1 and your home were valued at $500,000 you could borrow up to $250,000 over a three year term. If you preferred more time, option two may be more suitable and you could borrow up to $200,000 over a five year term.
The loan principal and accrued interest and fees are due for repayment either three or five years from the original drawdown date depending on the option you choose, or earlier if the property securing the loan is sold or its ownership otherwise changes. Minimum Borrower Age
Maximum Initial Loan
To Valuation Ratio* Loan Term
Option 1 70 50% 3 years from date
of initial drawing
Option 2 70 40% 5 years from date
Accommodation Bond Loans
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Key criteria that must be met
• You must be aged 70 or over. There is no maximum age limit.
• You must own the property. You may be the sole owner or share ownership with your partner. • You must not still reside in the home. You may,
however, rent the house out or have family or friends live in it in your absence.
If rented, any formal lease agreement must be for no more than 12 months in duration and may not take the tenant over the expiry date of the agreed 3 or 5 year term.
• The location of your home is also important. Check with your advisor or visit our website
www.banksiagroup.com.au/accommodationbondloan to see if your home sits within our standard
Term Age
Projected Property Value
Projected
Loan Balance Projected Equity
0 80 $500,000 $250,000 $250,000
3 83 $546,363 $326,675 $219,688
Property Equity and Accommodation
Bond Loan Illustration
The graph and table below is based on an 80 year old borrowing $250,000 (50% of the value of their house) over three years and a constant interest of 8.95%pa over the term. Additionally it assumes that the property value will increase at a rate of 3% per annum.
For a personal illustration of your own situation please speak to your advisor or visit our website www.banksiagroup.com.au/accommodationbondloan and use the calculator provided.
The graph and table below is based on an 80 year old borrowing $200,000 (40% of the value of their house) over five years and a constant interest of 8.95%pa over the term. Additionally it assumes that the property value will increase at a rate of 3% per annum.
For a personal illustration of your own situation please speak to your advisor or visit our website www.banksiagroup.com.au/accommodationbondloan and use the calculator provided.
Term Age
Projected Property Value
Projected
Loan Balance Projected Equity
0 80 $500,000 $200,000 $300,000 5 85 $579,637 $312,360 $267,277 600,000 500,000 400,000 300,000 200,000 100,000 $0 0 1 2 3 House Value Loan Value Equity Value
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Accommodation Bond Loan Matrix
The Basics
Minimum loan amount $100,000 Maximum loan amount $500,000 Terms available 3 years or 5 years
Loan Value ratios (LVRs) 50% - 3 year term or 40% - 5 year term
Property restrictions No retirement villages/resorts or transportable homes. Some postcode restrictions apply.
Negative equity guarantee Neither the borrower nor their estate will owe more than the value of the property unless the borrower breaches the loan terms. Insurance requirements Current owner’s replacement insurance policy
and landlord’s insurance if tenanted. Pension impact Refer to Centrelink.
The Set Up Costs*
Application fee $1,000 per application where the security property is valued less than $1m. $1,250 per application where the security property is valued more than $1m. Application fee to be quoted where the security property is valued more than $2m. Independent legal advice Costs borne by applicant.
Stamp duty Payable in some states. Once the loan is in place
Redraw of special repayments Minimum of $5,000. (fee applies) Monthly fee or charge Nil
Repaying or changing the loan
Repayments None required until the end of the term, sale of the property or upon death. Optional repayments Minimum of $500.
Early Repayment Fee Nil
Discharge Fee $300
Post settlement variations $300
*All set up fees may be paid out of the loan proceeds rather than upfront
Please note fees and charges are subject to change.
About Banksia
The Banksia Financial Group is an established independent national financier and Mortgage Fund Manager. Positioned as a prime non-bank financial institution, which has an established national distribution network, Banksia provides clients with a real alternative to the banks. Competitive rates, friendly service and finance solutions at your convenience. Banksia commenced operations in 1999 following the amalgamation of a number of long established and successful Victorian based debenture companies and contributory mortgage funds, some of which have been operating since the early 1900’s.
Banksia is a substantial commercial mortgage lender. Today it has under management some $800 million* of retail investor funds derived from branch and agency networks. The Group plans to add wholesale funds from institutional sources over the course of the ensuing year. Banksia principally operates through Banksia
Accommodation Bond Loans
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Questions about the
Accommodation Bond Loan
How can I have a loan and not be required to make regular repayments?
The principle is that you are not required to make any repayments until the end of the term (3 years or 5 years as selected), or if you move back in to your home, sell the property or upon death. Do I still own my home after taking out an Accommodation Bond Loan?
Yes. We will register a first mortgage over the property to secure the loan but the house remains in your name. Decisions about tenancy, property maintenance and the timing of any sale are yours to make. What happens if I die? Will Banksia want its money back immediately?
Under the terms of the loan your estate will have a 12 month period to repay the loan. Your estate may choose to retain the home and is free to repay the loan from any source. Can the loan be accepted if
signed under a Power of Attorney? Yes. Please submit a copy of the Power of Attorney with the loan application. Who is in charge of selling my home?
As long as the proceeds are sufficient to repay the loan, the sale is left entirely in your hands or that of the executor of your will. Once the property is sold, the loan and any accrued interest are repaid to us and the balance is divided up according to the terms of your will.
What if I move out of aged care back into my home? The loan needs to be repaid as soon as
practicable but strictly within 12 months. This would most likely be achieved by the return of your bond by the aged care facility. Can I repay my Accommodation Bond Loan at any time?
Yes. Full or partial repayments are permitted at any time without penalty. Partial repayments made prior to the loan maturity date are able to be redrawn at a later time if you require them. A small fee will apply to any redraw requests. Why are there three year or five
year limits to the term of the loan?
Our Customer Code of Conduct
We adhere to the highest ethical standards in dealings with our customers, their families and their advisors. To that end we have incorporated the following consumer safeguards into our standard business practices. Our commitment is further demonstrated through membership of the Senior Australians Equity Release Association of Lenders (SEQUAL) At a minimum we shall:
• Treat all borrowers with respect and dignity; • Participate in an ASIC approved External
Dispute Resolution Scheme;
• Ensure our Accommodation Bond Loan product carries a clear and transparent ‘no negative equity’ or ‘non-recourse’ guarantee. That is, the Borrower(s) will never owe more than the net realisable value of their property, provided the terms and conditions of the loan have been met; • Strongly encourage Borrower(s) to discuss
the transaction with family members and to ensure independent financial and legal advice from qualified professional advisors;
• Strongly encourage Borrower(s) to discuss the transaction with Centrelink to ensure they fully understand the impact, if any, on their Centrelink entitlements;
• Ensure that the Borrower(s) obtain independent legal advice performed by the solicitor of their choice. Prior to completion of the transaction, the borrower(s) or their solicitor will be provided with full details of the benefits the Borrower(s) will receive, and the obligations they are entering into; • Clearly and accurately identify all costs to the
borrower that are associated with the transaction;
• Not assert or imply that the Borrower(s) is
obligated to purchase any other product or service offered by Banksia or any other company, in order to enter into an equity release product; • Provide in writing, a fair and complete package
of equity release documents, covering the benefit and obligations of the product. This will include making available to Borrower(s) and advisors a tool illustrating the potential effect of future house values, interest rates and the capitalisation of interest on the loan; and • Ensure all loans are written under the
Accommodation Bond Loans
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Before you decide
Before you make any decisions about applying for the loan we suggest you talk through your circumstances with family and trusted advisors as well as read all our available information.
If your application for a loan is accepted previously made inheritance plans may be affected.
We require that you seek the independent professional advice of a financial advisor. Your financial advisor will be able to weigh up the various options available to you, the pros and cons of each and whether this loan is right for you. If you do not have a financial advisor, please contact us and we can help you locate one locally.
Disclaimer
The information contained in this brochure has been prepared by Banksia Mortgages Limited (ABN 36 087 342 238) (“BML”), part of the Banksia Group of companies. It is provided as general information only, without taking into account the objectives, financial situation and needs of any particular individual. For this reason, any individual should, before acting on any of the information contained in this brochure, consider the appropriateness of the information with regards to their individual objectives, financial situation or needs. This brochure is not to be taken as a substitute for the recipient exercising their own judgement and seeking their own advice. We recommend that all applicants seek appropriate professional, financial, legal and taxation advice. BML is not authorised to provide personal financial advice.
