The ZAG Fund is an unregistered, unlisted managed investment scheme.
To assist investors in their factual understanding of mortgage investments, the following provides answers to the questions most frequently asked.
The following FAQs are a guide only and are not a substitute for proper advice.
To invest in the ZAG Fund, please download and complete the application form.
What is a mortgage-backed investment?
A mortgage-secured investment is a form of fixed term investment. The monies you invest in the Fund are invested in the ZILT or in cash, term deposit holdings and other money-market instruments. The ZAGGA INVESTMENTS LENDING TRUST makes loans to various Borrowers, and, in general, these loans are secured by registered mortgages over real property in Australia.
What is the minimum ZAG Fund investment?
The minimum investment in the Fund is $50,000, subject to the discretion of the Trustee to accept a lower investment under circumstances which the Trustee deems to be acceptable.
How long do I need to commit my money to the Fund?
The minimum term is 12 months.
What happens if I need my money in the case of an emergency?
The Fund must be treated as a fixed term investment. Under the Fund’s Constitution, the Trustee is under no obligation to process requests for return of your funds prior to the expiry of the agreed term. This is in line with Zagga’s obligation as the trustee of the Fund to maximise available returns to all Investors. However, Zagga may, at its discretion and subject to the availability of substitute Investors to take your place or other available funds, consider withdrawal requests in special circumstances.
What happens if the Borrower is late or fails to make payments?
Payment arrears on any one loan may have an effect on, but will not cause a cessation of, the Fund’s semi-annual distributions to Investors. Investors therefore still receive their distribution within 14 days after the end of the distribution period. Rates of return to Fund Investors are a product of the interest paid by Borrowers less the Trustee’s fees, the expenses of the Fund and the fees and expenses of ZAGGA INVESTMENTS LENDING TRUST.
What happens if a loan is not repaid by its maturity date?
The ZAGGA INVESTMENTS LENDING TRUST, at its discretion, may elect to extend a loan past its maturity date if it is believed to be in the best interests of all parties involved. This extension may be required to provide a Borrower with extra time to complete the renewal process, finalise the refinance or repayment of the loan or to finalise the sale of the security property.
The ZAGGA INVESTMENTS LENDING TRUST in these instances will also use its discretion in deciding whether to apply the default rate of interest after considering the best interests of all parties involved.
What is the priority of debts in a Mortgage in Possession situation?
In a case where, following a Borrower’s default, the ZAGGA INVESTMENTS LENDING TRUST has sold a security property or recovered all or part of the Fund’s capital investment, the following order of priority applies to payment of money received in accordance with the ZAGGA INVESTMENTS LENDING TRUST’s obligations at law:
- first, towards payment of other liabilities having priority at law to the mortgage investment, for example, Council rates, GST obligations & liquidators’ fees;
- secondly, in payment of the ZAGGA INVESTMENTS LENDING TRUST’s fees, charges and other costs or expenses incurred in the proper performance of duties (including legal costs on a full indemnity basis);
- thirdly, in payment of the Fund’s capital investment; and
- fourthly, in payment of any interest at the lower rate, and thereafter at the higher rate (if applicable), as it falls due to which the Investors are entitled but not yet paid.
Investors should be aware that GST may be payable on the sale of a property by the ZAGGA INVESTMENTS LENDING TRUST in certain circumstances and this will reduce the funds available for distribution to Investors.
After the sale of the security property, the ZAGGA INVESTMENTS LENDING TRUST has no obligation to fund or otherwise pursue further recovery action. However, the ZAGGA INVESTMENTS LENDING TRUST will liaise with the Fund (and the Trustee will liaise with Investors) to determine whether Investors would (via the Fund) like to contribute on a voluntary basis to the costs of further recovery action. If further recovery action results in the recovery of funds, the priority of distribution of these funds will be based on the contribution to the costs of the recovery action and the priority of the original mortgage investment.
If the Borrower defaults, who is responsible for the legal costs?
The Borrower is responsible for legal costs which are debited to the Borrower’s loan account. However, should the sale of the security property not realise sufficient funds to repay the amount advanced (and therefore capital invested), the interest outstanding and legal costs debited to the loan, the Fund will be liable for such costs.
What happens if the Borrower pays out a loan early or makes partial repayments during the loan term?
If the Borrower pays out the loan early or makes partial loan repayments during the term of the loan, the funds will be re-lent as further loan applications are approved. Investors will not be affected by early repayments or partial repayments unless, as a result, the amount of cash returned by the ZAGGA INVESTMENTS LENDING TRUST to, and held in, the Fund becomes significant, reducing the overall return of income to the Fund. Should this be the case, interest returns may on a temporary basis not be as high as expected. The Trustee will retain 100% of any fee collected from the Borrower in association with early repayment or partial repayment.
Who is the registered mortgagee on title?
To ensure that we maintain an ‘arms-length' relationship amongst Borrowers, Investors and the Fund, we have set up processes and structures to ensure that Investors' funds and Borrowers' repayments, are managed within a stand-alone trust structure, the ZAGGA INVESTMENTS LENDING TRUST. Amounts raised from Investors are invested by the Fund in the ZAGGA INVESTMENTS LENDING TRUST and the ZAGGA INVESTMENTS LENDING TRUST makes Loans to Borrowers.
Zagga Investments Pty Limited enters the loans as trustee of the Zagga Investments Lending Trust, and holds the associated rights and benefits in respect of the loan and the mortgage security and amounts paid by a Borrower as trustee on behalf of the Fund. The Fund has a beneficial, fractional interest in each loan made and the security obtained by the ZAGGA INVESTMENTS LENDING TRUST using funds invested by the Fund. The ZAGGA INVESTMENTS LENDING TRUST has other investors, but each investor only has an interest in the loan(s) advanced using the funds contributed by them to the ZAGGA INVESTMENTS LENDING TRUST. Where the ZAGGA INVESTMENTS LENDING TRUST combines funds invested by more than one investor in making a loan, each investor has a beneficial interest in the loan fractionally proportionate to the amount of their funds contributed to the loan.