Many extended families will readily see the benefits in the Assquire system for grandparents, aunties, uncles, children, nephews, nieces, grandchildren and step-relationships (such as step-children) – or just others that they love or feel endeared to so much that they are consider as “family”.
The ability to “keep the money” IN the family and to utilise or transfer the buying power of older generations to younger generations (or even the reverse in some instances) is very appealing when we consider the amount of dead money in rent, lenders mortgage insurance and even mortgage repayments that our children or grandchildren “leak out” of the family unit.
Assquire’s Founder recognised the cost of this over just a three year period when he began posting on the subject and you can view some of his videos on this here under the heading “Assquire Family”.
For more background on Assquire Family, see our Assquire Family page on how it works.
So how do families logically get started with Assquire Family?
Let’s make the following simplifying assumptions:
a) children choose the home they will occupy to buy.
i.e. that it’s the adult children who are the proposed Mortgage Alternative home buyers from their Assquire investor parents or grandparents and that it is paramount that those children buy the type of home in the location that they really want to live in.
b) that the children’s purchasing power is more constrained by their savings to date than it is by their income and ability to service monthly repayments.
i.e. that a saved deposit requirement will be the more limiting constraint for many home buyer couples to a greater degree than their ability to service regular monthly payments from their combined gross household incomes
Whilst it is true that Mortgage Alternative does dramatically reduce up front savings, deposit and other cost barriers, it is also true that one cannot always afford what one likes.
How to Proceed – What’s the Agreed Value of the home today that limits the Buyer under MA?
On the basis of these two assumptions, it seems that it would ordinarily be best to engage with the Assquire system by understanding very early in the process just exactly what value home (detached, duplex, townhouse, apartment or unit but not a dual occupancy) the Mortgage Alternative home buyers and their savings to date permit them to buy and lease over an extended period.
It will most likely always be higher than with a traditional mortgage, unless the buyers have a SUBSTANTIAL deposit of >10% saved, so it’s best to have them apply to be credit assessed by Haigslea Residential, to find out.
Haigslea Residential needs to credit assess the home buyer applicants who must each live in the property as “eligible occupiers” and advise them of the limit in a home’s “Agreed Value” for which they will qualify. It’s kind of like a non-binding pre-approval letter from a lender and gives the buyers an idea of their purchasing capacity.
The MA Buyers are ok. Now what about the Assquire Investor’s Limits under Assquire so far as Equity & Borrowings are Concerned?
Once we all know the MA buyer’s capacity limits in terms of Agreed Value with the Assquire investor, the Assquire investor parent or grandparent or other relative can then have a family discussion with the Mortgage Alternative home buyers to understand whether the investor has the required equity to meet Assquire investor equity requirements.
As Assquire Family currently requires the investor to have equity of at least 20% of the Agreed Value with the MA buyer, it follows they cannot borrow more than 80% of that Agreed Value from a bank or other lender, in the investor’s financing of THEIR purchase of the property.
Let’s remember that under the Assquire system, its the parent or grandparent or other extended family member who buys the home on usual short settlement (conventional) terms and then appoints Haigslea Residential Limited (as a licensed real estate agency and operator/promoter of the Assquire system) to re-sell and lease the home over a maximum extended settlement period of ten years to the Mortgage Alternative home buyer.
So in this example, it’s best for the MA buyer children to apply to become MA buyers first here, then for the parents or grandparent investors to apply to become Assquire investors here, then speak with their bank, other lender or mortgage broker to find the best mortgage rates and terms that suit them, then speak to the lender of choice and provide them with the Explanatory Guide for Lenders that we hand to investor applicants as part of their application and credit assessment process as an Assquire investor.
Let’s assume that the children earn sufficient that a bank or other lender will qualify them for a $450,000 home with a 95% mortgage and $25,000 in equity after their $37,000 in savings to date are eroded by $12,000 in lenders mortgage insurance, mortgage registration fees and legal/conveyance fees on a traditional mortgage scenario.
Let’s assume they’d prefer a $500,000 to $600,000 home in a suburb where they really want to live closer to work or family or both, to reduce their commuting costs by $40 pw over the next ten years AND to avoid the likelihood that with an intended growing family, they will otherwise need to sell the $450,000 home they otherwise need to buy with a traditional mortgage within 6 years, incurring around $40,000 in relocation, exit commission and entry stamp duty costs on a value of about $600,000 in six years time.
With MA, the extra purchasing power gets them a bigger better located home in the location that’s more convenient for them and better suits their long term needs.
If they qualified for a mortgage at $450,000 with $37,000 saved, it’s likely Assquire Family or Assquire & MA can deliver them into a $600,000 home TODAY!
So what if the kids are qualified in the above example but the parent investors don’t have 20% of $600,000 in Equity?
That would simply mean a family discussion over which was more important:
a) keeping the money in the family. See our Founder’s post here for the extended family’s costs of NOT keeping the money in the family using Assquire Family; or
b) the children seek to be coupled to an alternate Assquire Investor who is not family, in which case the parent’s financial constraint does not constrain what the children are approved for and desire. Note that Assquire investors who are not family have a higher equity requirement of 25% of Agreed Value.
It’s also possible that grandparents and parents may be able to collectively act as the Assquire investor either as joint tenants or tenants in common. Legal advice should be independently sought by all involved, if this is contemplated, but it may help more families to make those significant extended family savings noted in a) above. Aunties or uncles may be another part option for some to get to the required 20% equity or your accountant or financial adviser may have some suggestions.
Whichever investor it is that is matched to the MA buyers, the Assquire investors should jointly proceed to apply (one application) as Assquire investors here.