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The chart in Garpal Gumnut's post is hotlinked directly from BigCharts rather than being attached to the post, so the data displayed is current.
What's with the magical post above from Garpal Gumnut, dated 2013 but has a chart from Jan 2016?
The chart in Garpal Gumnut's post is hotlinked directly from BigCharts rather than being attached to the post, so the data displayed is current.
A homeowner sells a percentage of the future sale proceeds of their home (to a maximum of 50 per cent) in return for an immediate lump sum cash payment.
Say I sell 50% of equity in my home. How large is the lump sum cash payment? I'm assuming it's not for the full equity at current home values?
Correct me if I'm wrong but what you're describing sounds like BEN is long on a sort of futures contract for a host of non-liquid assets without a specified delivery date.
Yep, that's my understanding of it too.Correct me if I'm wrong but what you're describing sounds like BEN is long on a sort of futures contract for a host of non-liquid assets without a specified delivery date.
Yep, that's my understanding of it too.
Which is why a revaluation entry is included each period on the profit & loss statement. There's also an asset on the balance sheet recording their estimate of the proceeds they'll receive at the time of sale (which moves with the market values of the underlying property). So far, so good because the property market has been appreciating.
Besides a few fees here and there, they don't receive any cash from the customer until the property is sold or the person dies. There is no interest income and the customer cannot default or go into negative equity like a reverse mortgage (although there are regulations in Australia which probably stop that happening any way).
They do, as McLovin mentioned use an actuary. It's actually a joint-venture with a high-profile actuary by the sounds of it (Peter Szabo, who seems to have came up with the idea in the first place).
I believe they do build a bit of a buffer into the calculations to cover some of the downside. But surely, if the property market blows up they're exposed if it's still low when the time comes for these properties under the scheme are sold.
They are effectively giving the customer cash now, in exchange for the chance of getting more cash later when the property is sold.
Seems like the maximum is 50% for a lump sum payment. There's of course a whizz bang formula which decides what this 50% is based on.
Income from a bank's perspective on a reverse mortgage is based on interest income received (usually at a later date because it is also capitalised until the house is sold or the person dies). It's probably a similar result if the market is far lower at the time the loan needs to be repaid, but I assume with a reverse mortgage the bank has recourse to any other assets of the person, and Homesafe doesn't.
I don't think they have 'recourse' to anything. They've effectively paid cash for a fixed share of the future proceeds. If the future proceeds are lower than expected they have to wear the difference.Interesting. I'm surprised they have no recourse to the house beyond the amount of equity they have agreed to.
Interesting. I'm surprised they have no recourse to the house beyond the amount of equity they have agreed to. That's a pretty big matzah ball to have on the balance sheet. It is much closer to what Sinner described than my first lazy look suggested. I actually though initially the maximum 50% number was so that they had some buffer built in.
They've effectively paid cash for a fixed share of the future proceeds.
It's still not clear to me how much the approx lump sum might be as a % of the total they are entitled to, so I thought I would check out the website and spotted this which made me laugh...
ANZ is about 50% down. From it's topHas anyone else bought a bank and seen it fall 30% after they bought ?
Has anyone else bought a bank and seen it fall 30% after they bought ?
Did you open an account there before you bought? It's like banking transported back to 1999.
Hold on Mr Burns. It's turning.
I am sure its oversold. I need another 70c rise to break even. Mucked it up a bit.
The market is acting irrationally.
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