Accommodation Bond Loans Banksia Mortgages Limited ABN 36 087 342 238 Australian Credit Licence Number 227733 www.banksiagroup.com.au Investments & Loans
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 employed in its offices in Melbourne, Adelaide and in a number of regional centres in Victoria and New South Wales. The Administration Centre for the group is located in Kyabram, Victoria. 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. www.banksiagroup.com.au Investments & Loans
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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. Minimum Borrower Age Maximum Initial Loan To Valuation Ratio* Option 1 70 50% Option 2 70 40% *The agreed value of your property is based on an independent valuation. Loan Term 3 years from date of initial drawing 5 years from date of initial drawing 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. www.banksiagroup.com.au Investments & Loans
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 postcode areas. If your home is not within our standard list please give us a call and we can calculate the amount you can borrow. Accommodation Bond Loans page 4
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. 600,000 500,000 400,000 300,000 200,000 100,000 $0 0 1 2 3 House Value Loan Value Equity Value 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 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. 600,000 500,000 400,000 300,000 200,000 100,000 0 80 81 82 83 84 85 Value of Property Total Repayments Total Equity 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 www.banksiagroup.com.au Investments & Loans
Accommodation Bond Loan Matrix The Basics Minimum loan amount $100,000 Maximum loan amount $500,000 Terms available Loan Value ratios (LVRs) Property restrictions Negative equity guarantee Insurance requirements Pension impact 3 years or 5 years 50% - 3 year term or 40% - 5 year term No retirement villages/resorts or transportable homes. Some postcode restrictions apply. Neither the borrower nor their estate will owe more than the value of the property unless the borrower breaches the loan terms. Current owner s replacement insurance policy and landlord s insurance if tenanted. Refer to Centrelink. The Set Up Costs* Application fee Independent legal advice Stamp duty Once the loan is in place Redraw of special repayments Monthly fee or charge $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. Costs borne by applicant. Payable in some states. Minimum of $5,000. (fee applies) 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. Please refer to our website www.banksiagroup.com.au/accommodationbondloan or call on 1800 722 079 Accommodation Bond Loans page 6
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 Mortgages Limited (BML) and Banksia Securities Limited (BSL). BML is the licensed responsible entity for the Banksia Mortgage Fund and mortgage administration manager for the group, while BSL is a licensed unsecured note issuing company with the purpose of raising funds for mortgage lending. Visit our website at www.banksiagroup.com.au *This figure is current as at 1 July 2011. www.banksiagroup.com.au Investments & Loans
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. 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? We know that the biggest issue people faced when entering aged care was how to raise sufficient funds to cover the bond. By limiting the term to either 3 years or 5 years we are able to offer the 50% LVR limit (for three years) or 40% LVR limit (for five years) as compared to most equity release products that offer much lower LVRs aligned with the borrowers age. 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. Accommodation Bond Loans page 8
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 National Consumer Credit Protection laws. Additionally Banksia will comply with the Privacy Act and Trade Practices Act. www.banksiagroup.com.au Investments & Loans
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. You will also need to consult your own solicitor or legal advisor. If you are receiving any Government Income Support payments you should check with Centrelink as to how taking out a loan may affect your payments. You may also wish to visit www.sequal.com.au the Senior Australians Equity Release Association of Lenders website. SEQUAL is the self-regulatory body of the equity release industry, dedicated to the protection of borrowers and the promotion of responsible lending options. The products promoted by SEQUAL members are required to adhere to the strict SEQUAL Code of Conduct. Banksia is pleased to offer a product that not only meets but exceeds these requirements. Accommodation Bond Loans page 10
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. While the information contained in this brochure is believed to be reliable, no representation, warranty or assurance of any kind expressed or implied is made as to the accuracy or completeness of the information and may be subject to change without notice. BML, its officers, directors, employees and agents accept no liability or responsibility whatsoever for any loss arising from any use of this document or its contents. BML accepts no obligation to any recipient to update or correct any information contained in this brochure. This brochure does not purport to identify or suggest all the risks (direct or indirect) or material considerations which may be associated with this product and does not purport to be personal financial advice. Any examples shown in this brochure are used to demonstrate how features of the Accommodation Bond Loan work. The examples used are for illustrative purposes only and are not an estimate or guarantee of future interest rates or property growth rates. For further information contact your local Banksia Branch or freecall 1800 722 079