Friday 9 November 2018

FundMyHOME Scheme, who bears the risk?


FundMyHOME scheme, according to their website, is developed by EdgeProp Sdn Bhd, FundMyHome.com brings together first-time homebuyers and institutions in a mutually supportive relationship. Buyers pay 20% of the property price to own the home, choosing from a wide array of high-rise and landed homes of different prices and locations showcased on FundMyHome.com. The balance 80% of the cost of the property is contributed by participating institutions, who share the returns from changes in the future value of the home.

With no bank loans and monthly payments to worry about, the result is a simpler, safer and faster home ownership arrangement that also provides greater emotional and financial security (Read more here).

Sounds like a good deal?  Why do institution investors would like to fund the 80% of the property price?  Let’s look at the table that illustrates the possible scenarios after five years of the scheme, which is taken from their website (Read more here).



Basically, the institution investors downside risks are borne by the house buyer.  For example, if the house price is RM300,000 initially, the house buyer needs to pay 20% of the price, which is RM60,000 while the institution investors pays RM240,000.  Five years later, if the house price drops to RM270,000, the sales proceeds to the house buyer will be RM30,000 while the institution investors still get back their capital of RM240,000.

On the other hand, the potential price appreciation of 20% or less will not be enjoyed by the house buyer as well.  House buyers are only entitled to share the gain of the property if it has appreciated more than 20%.  Who has the good deal?

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