Downsizers will be able to secure a new off-the-plan apartment or townhouse without having to borrow money, deplete their savings or sell their home, under an innovative new financial product.
Sydney-based company Downsizer.com has teamed up with deposit bond provider Deposit Power to offer the first-of-its-kind downsizer deposit solution.
The deposit bond allows downsizers to pay the required deposit on a new off-the-plan dwelling, by using the equity in their existing home.
This means that downsizers won't need to cut into their savings, or mortgage or sell their existing home, to secure an apartment ahead of its construction (although a $1,500 deposit bond fee is payable on contract exchange).
Typically, the downsizer will then sell their existing home just before settling on, and moving into, the finished apartment.
The Downsizer.com offering is designed to help the many downsizers who are ‘asset rich but cash poor’.
These are over 50s who own their own home - which may be worth many millions - but have limited funds available for a deposit on a new home.
Downsizer.com’s co-founder and managing director Mark Macduffie, a former Commonwealth Bank executive, said there are currently more than 400 off-the-plan dwellings currently available for purchase via the deposit bond.
This includes homes from independently rated developers either planned or under construction in the Australian Capital Territory, Sydney and Melbourne.
“We make it as simple and easy as possible for asset rich and cash poor downsizers to buy off-the-plan dwellings with zero cash deposit,” Mr Macduffie said.
“We’ve worked with Deposit Power to create a completely bespoke downsizer bond that recognises that this cohort is a much less risky proposition than a first home owner that requires a 90 per cent mortgage.
“What we are offering downsizers is this frictionless ability to use their existing dwelling to buy their future dwelling.”
As part of the offering, downsizers can check their eligibility for the bond, and the homes available to purchase via the arrangement, at the Downsizer.com website.
One of the first properties available via this new arrangement is the WOVA apartment project by major ACT developer Geocon at the Woden town centre, which is also listed on Downsizing.com.au.
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When the downsizer pays the full purchase price at settlement, the bond automatically expires.
Downsizer.com says the only circumstance in which a caveat may be placed on the downsizer’s existing home would be if the downsizer fails to finalise the purchase of the new apartment, and pay for the deposit, despite all contractual obligations being met by the builder.
Ordinarily, off-the-plan apartments require a ten per cent cash deposit, which for a $1 million apartment would cost $100,000.
FIND OUT MORE:
- Downsizing into a new apartment or townhouse: here's 13 tips to help you make the move
- Learn about the different downsizing options on offer, and insider tips on making the move, in our just-released Ultimate Guide to Downsizing 2022.
- Listen to Downsizing.com.au editor Mark Skelsey talk to Mark Macduffie from Downsizer.com about the new product