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Casting mortgages in a new light

25 Nov 2015

A contributory mortgage is when one or more people contribute, as lenders, to the loan. Rather than having all investors registered on the certificate of title to the property, the mortgage is usually registered in the name of a trustee on behalf of all investors to that loan. Each investor has an exposure to the loan in the proportion that each contributed capital. Investors are entitled to interest income and a return of capital from a specific syndicate-fund, not from a diversified pool of mortgages.

"Investment in a first mortgage loan is generally a capital-stable investment, offering monthly interest payments that are typically higher than those payable by retail bank deposits," Mr Prasad said.

"Contributory mortgage funds are an improvement on the pooled fund structure, as they allow investors to tailor risk and return, location, and the duration of returns to their own preferences. In some ways they are an expanded form of the peer-to-peer lending which has grown so strongly in recent years.

"Investors can construct their own asset exposure—from a single concentrated investment to a diverse portfolio of registered first mortgage investments."

Investors in a contributory mortgage fund have the option to put money into discrete syndicate funds of their own choosing, giving them greater transparency and control over their investment.

Mr Prasad said there are a number of other benefits to a contributory mortgage fund, including income stability, capital stability, credit quality and a defined term investment.

"Monthly interest income provides investors with a high degree of cash flow certainty. In the case of the Australian Unity Select Mortgage Income Fund, we currently offer interest rates between 6.50 and 9.50 per cent per annum, depending on the date, type and term of the loan and security provided."

Each individual investment (or syndicate fund) is secured by a registered first mortgage over real property assets, generally geared to a maximum of 70 per cent, and each investment opportunity for the mortgage fund must receive credit approval from the fund manager before being offered to investors.

"Investors can also choose the term of the investment, and know their money will be returned at the end of that term. In the case of the Australian Unity Select Mortgage Income Fund, the term is a minimum of 12 months to a maximum of two years.

"A contributory mortgage fund can provide investors with the best of both worlds—the ability to select an individual investment that suits their own risk and return requirements, and professional mortgage management from an experienced team," Mr Prasad said.

Australian Unity Funds Management Limited (AUFM) ABN 60 071 497 115, AFS Licence No. 234454 is the Responsible Entity of the Australian Unity Select Mortgage Income Fund.

AUFM does not guarantee the repayment of capital or income to any investors. There is a risk that you may lose some or all of the funds that you invest.

The information in this document is general information and is not based on the financial objectives, situation or needs of any particular investor. Investment decisions should not be made on the basis of past performance. In deciding whether to acquire, hold or dispose of the product you should obtain a copy of the Product Disclosure Statement (PDS) and consider whether the product is appropriate for you. A copy of the PDS is available by calling 1800 649 033 or visiting The information provided in the document is current at the time of publication.


For further information, please contact:

Mr Roy Prasad 03 8682 4405

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