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If Jack and Adrian's $400,000 property has decreased in value by 5% from when they purchased it to $380,000, on sale they may be eligible for a "depreciation allowance" (ie, the Zero20 lender may share in the realised capital losses). |
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| Note that the Zero20 lender will not share in any losses if they are not fully realised by you when you repay the Zero20 (eg, if you refinance the Zero20 and there is no actual sale event). |
| While the property will sell for less than they purchased it for (ie, $380,000), Jack and Adrian are able to share with the Zero20 lender the $20,000 loss that they would have had to otherwise bear by themselves under a traditional home loan arrangement. |
| In particular, the Zero20 lender, having originally provided a 20% Zero20, will bear $4,000 (or 20%) of their total $20,000 loss. |
| Because Jack and Adrian are selling the property they will not have to repay the full Zero20 amount and are therefore $4,000 better off. |
| Note that the depreciation allowance provided by the Zero20 lender may not always apply, for example if you are in default when the property is sold or if you refinance out of the Zero20 and do not actually realise a real capital loss (ie, because you have not sold your property). |
| Year 3 |
| Original property value: |
$400,000 |
| less property value at sale: |
$380,000 |
| Capital depreciation: |
$20,000 |
| Original Zero20 amount (20%): |
$80,000 |
| less depreciation allowance (20%): |
$4,000 |
| Zero20 less 20% of depreciation: |
$76,000 |
| Traditional home loan repayment: |
$286,832 |
| Jack and Adrian's equity after repaying the Zero20 and traditional home loan: |
$17,168 |
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| Note: This example excludes application fees and other fees associated with the loans such as valuation fees, account keeping fees, transaction fees and lenders mortgage insurance (if applicable) as well as transaction costs associated with refinancing a home loan such as stamp duty, government fees, conveyancing fees and stamp duty on lenders mortgage insurance. The example assumes that the Zero20 loan is for 20% of the property's value at the outset and that no default interest is payable at any time over the term of the Zero20 loan. The actual Zero20 loan may be for less than 20% of the property's value and the outcomes may vary considerably if default interest becomes payable. The example assumes that the traditional home loan interest rate is 7.80% p.a, the loan term is 25 years, all principal and interest payments are made on time, the only repayments made are the required repayments - that is, no additional repayments or redraws are made, and no event of default has occurred and default interest is not incurred at any time during the term of the loan. Please note that these assumptions may not apply in your circumstances. Interest rates available on a traditional home loan may be lower than the interest rate on a traditional loan taken in conjunction with an Zero20. Ask your lender to compare these costs for you, while taking your circumstances into consideration. |
| For any additional assumptions used in calculating this example please refer to the assumptions page. We strongly recommend that you obtain independent legal and financial advice in relation to this Zero20 loan prior to entering into the Zero20 loan contract. |
Please carefully read and review the Zero20 Disclosure Document. This website does not take into account your personal objectives, financial situation, or particular needs. You should obtain a copy of the Zero20 Disclosure Document and the Zero20 Terms and Conditions Booklet and consider them before making a decision about whether to enter into a Zero20 Home Loan.
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