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Staircase DDM Examples

 *These examples are fictitious and are for illustrative purposes only

Mary

Reduced home loan by over $26k within 5 years

Mary purchases a $1m home with an 8% deposit, the other 12% being covered by Staircase. The
property does not increase in value over the 5 year DDM term. Mary could rollover the loan, but she may also have the choice to refinance all or part of the Staircase loan depending on the principal
reduction of the primary loan.


Staircase Borrowing: $120,000
Staircase Repayments per month: $1,200 (Interest Only)
Bank Repayments: $4,223 (Principal and Interest) 
Refinanced loan after 5 years:
Principal outstanding to main lender $696,837
Staircase DDM final payment: $120,000
Refinance at Bank $816,837 at LVR 81.7%
New Repayments $4,950
Potential Home loan reduction after 5 years: $26,388

The example shows that although Mary pays an additional $87.97 per month with DDM, she enjoys a loan value reduction after 5 years of $26,398 ($816,837 compared to $843,225). In addition, she has had the flexibility of a standard 80% LVR loan, and has not capitalised an LMI cost, which would have been about $40K in this example.

John

Purchased a home earlier and reduced home loan by $25K over 3 years

John has recently graduated and has a good job with good serviceability, but cannot get a reasonable loan because he has insufficient deposit. John purchases a similar $1m home to Mary (opposite example) with an 8% deposit, the other 12% being covered by Staircase. However, in John’s case, the property enjoys a 3% per annum growth to a value of $1..16m over 5 years.

Staircase Borrowing: $120,000
Staircase Repayments per month: $1,200 (Interest Only)
Bank Repayments: $4,223 (Principal and Interest)
Refinanced loan after 5 years:
Principal outstanding to main lender $696,837
Staircase DDM final payment: $120,000 + $19,394K Capital Appreciation
Refinance at Bank $836,231 at LVR 72%
New Repayments $5,067
Potential Home loan reduction after 5 years: $6,994

John pays a pro-rata portion of his capital gain, because Staircase shared the risk with him. However, in this example, John could have refinanced after say 3 years and saved even more on his home loan, and he would have saved on the capital gain appreciation. He also did not invest $40K LMI, which represents a sunk cost and negative equity. 



Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided.