Invest in residentialReal estate
OSQO has developed a Deposit Gap Loan funding solution using a compliant managed investment trust structure
A unique
investment opportunity
A unique investment opportunity in a structured debt product with growth indexed to residential real estate
- A quarterly interest rate return (mortgage comparison rate equivalent) variable with the RBA cash rate
- Appreciation in value based on Corelogic indexation of underlying residential property assets
- Allows Bank of Mum and Dad to invest in their own children’s property purchase in a formal, arms length and structured way via the OSQO Deposit Gap Loan Direct Fund
- Established as a managed investment trust in Australia with OSQO Capital as Investment Manager
- External service providers supporting investors and the Fund structure
- Will only invest in Deposit Gap Loans to facilitate the purchase of residential properties in Australia which have been assessed and approved by OSQO
Key investment
highlights
The Fund will focus on providing consistent and sustainable returns for investors over the medium to longer term horizon
01
A Target return of 5-10% * over long-term investment horizon. Return to be a mix of interest income and residential property growth rate
02
Strong ESG principles - powering the Australian dream of home ownership
03
Investment return will be linked to residential property. Diversified portfolio of loans (after initial ramp up period) across main residential hubs of Australia
04
Initial investment term of 3 years with evergreen rollover
05
Strict credit assessment criteria and ongoing management
06
Quarterly income distributions based on “mortgage rate” interest paid by borrowers
07
Property growth incorporated into return and paid out periodically on realised amounts
08
Targeted borrowers will be in the professional higher-income range; not looking to compete with Government initiatives focused on lower income thresholds
Back the Bank of Mum and Dad
Environmental, Social & Governance
Strong ESG principles underlie the Deposit Gap Loan Pooled Fund proposition
- Gain exposure to an attractive long term asset class via a company that is doing social good
- OSQO is a home 'deposit gap' lender developing foundational wealth and healthier communities through creating housing attainability solutions for aspiring home owners by getting them into their home sooner in a more cost-effective way
- Facilitating generational wealth transfer in a fair and transparent fashion by allowing the Bank of Mum and Dad to assist using a more formal arms-length arrangement than the current ad hoc approach
- Capital in OSQO’s Deposit Gap Loan Pooled Fund will assist good credit borrowers to enter the property market by lending deposit gap funds to home buyers that may not qualify for Government schemes and who do not have the financial support others enjoy
A better way
for everybody
Home buyers avoid Lender’s Mortgage Insurance
For significantly less than the cost of Lender’s Mortgage Insurance, OSQO will provide home buyers with a Deposit Gap Loan, funded by investors in a managed investment trust established and managed by OSQO for the explicit purpose of originating DGL loans.
Investors earn interest income & residential real estate indexed returns
During the initial period of the DGL, while their LVR is above 80%, home buyers make interest only repayments at a rate benchmarked to their mortgage interest rate.
Plus, to accommodate for increased risk, investors accrue a pro-rata share of the indexed capital growth in the postcode locations of the borrower properties in the form of Property Growth Interest (PGI).
As soon as a borrower’s LVR achieves 80% or below (within the 10 year interest only period from settlement) borrowers may switch from interest only to principal & interest repayments. At this point the PGI accrual is fixed and capitalised to the DGL amount owing.
Returns including interest and PGI received are calculated and paid to investors in the trust on a quarterly basis.
Home buyers maintain their equity leverage from day 1
Home buyers hold onto the equity in their home, enabling them to leverage their 80% LVR to maximise growth potential, while investors get a fair return on their investment.
Society benefits from increased home ownership
An equitable distribution of wealth and generational transfer of wealth. Allows Bank of Mum and Dad to support their children’s home buying journey with a formal arms length approach.
OSQO structures and manages the whole process
OSQO collects repayments monthly, pays investors quarterly and tracks property values to let home buyers know when they’ve built up enough equity to achieve an LVR of 80% or below and either refinance and repay their DGL or switch to principal and interest repayments, at which time accrual of PGI will cease.
OSQO Deposit Gap Loan
Origination Process
OSQO will focus on assisting high-quality borrowers attain their property purchase goals through an integrated distribution model, credit assessment and asset quality process.
Distribution
DGL Calculator
OSQO has developed a proprietary software tool, the DGL Calculator, to estimate the potential cost savings of a Deposit Gap Loan versus Lenders Mortgage Insurance.
Mortgage Broker Panel
OSQO is building relationships with a number of mortgage brokers, who will be the primary sellers of Deposit Gap Loans.
Partner Lenders
OSQO is building relationships with a number of partner lenders, who will work in unison with OSQO to deliver the best possible outcome to home buyers.
Loan Credit Assessment
Suitability
OSQO will comply with the National Consumer Credit Protection Act and ASIC Regulatory Guides to ensure that Deposit Gap Loans are only sold to home buyers where this is a suitable solution for their unique requirements.
Serviceability
OSQO will apply stringent debt to income metrics during credit assessment.
Credit Scorecard
OSQO has developed a bespoke credit scorecard for each home buyer which includes their Equifax credit score and adjusts this using nine additional factors, such as employment type, education, age, guarantor status etc.
Asset Quality
Overview
OSQO recognises that Fund investors will be impacted by borrowers’ ability to service their loan and also the quality of property purchased.
To this end, we have developed an asset quality policy which includes quantitative and qualitative metrics in determining whether to approve a Deposit Gap Loan.
High Risk Postcodes
Working with our corporate partners, we have identified a number of high-risk postcodes that warrant close scrutiny before approving.
Undesirable Property Attributes
OSQO recognises that certain attributes, such as being on a busy road, proximity to power lines and industrial areas, can impact on the value of a property, particularly when a borrower is unable to service their Deposit Gap Loan.
