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Click here to download a comprehensive product guide.
The EFM® can help you to:
- Get out of the renting cycle and into home ownership
- Buy the house you want in the suburb you want
- Buy a house instead of an apartment, 3 bedrooms instead of two
The Equity Finance Mortgage (EFM)®, together with a Balanced Loan enables you to: |
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- Reduce monthly home loan repayments by up to 20%
- Increase your borrowing capacity by up to 25%
- Reduce the upfront and ongoing costs of purchasing a new property
An EFM works in conjunction with a traditional home loan. Together, they let you move some of the expense of a traditional home loan to later when you eventually sell your property. Here's how:
- An EFM® allows you to borrow up to 20% of a property's value;
- There is no annual percentage rate applicable to an EFM loan, unless you are in default;
- You are not required to make any regular monthly interest repayments throughout the EFM loan, which you can hold for 25 years.
Instead, when you sell the property or repay the EFM for some other reason, you repay the EFM amount you originally borrowed plus up to a 40% share of any increase in the value of the property (assuming you take out a 20% EFM).
If you take out a smaller, say, 15% EFM, then the lender will only be entitled to 30% of the growth, leaving you with 70% of the upside on your home.
And while nobody likes to talk about property values decreasing, if this does happen when you have an EFM and you are selling your property, you may not have to repay the full EFM loan amount - a feature unique to an EFM.
Specifically, if the value of your home falls, and you realise a capital loss when you sell your property, the EFM lender will share up to 20% of the realised losses on your property (assuming you take out a 20% EFM)! The share of the losses borne by the lender will depend on how much you borrow in the first place and how much your property has decreased in value. The lender will not share in any losses if they are not fully realised by you when you repay the EFM.
The original idea behind the EFM loan, which was developed based on the pioneering work of the 2003 Prime Ministers Home Ownership Task Force, was to create a better alignment of interests between the borrower and lender:
- If you do well, and your property's value increases, the lender can do well;
- However, if you suffer, and you realise a loss when you sell your property, you may not be charged any regular interest whatsoever on the EFM;
- In fact, the EFM lender may share up to 20% of the losses, leaving you with less to repay on the EFM loan than they originally lent to you!
Click here to download a comprehensive product guide.
In the news - You can afford a bigger house - Your Mortgage April 08
In the news - Banks want to share equity, not move it - Sydney Morning Herald March 07
We strongly recommend that you obtain independent legal and financial advice in relation to this EFM loan prior to entering into the EFM loan contract.
Fees, charges, terms, conditions and lending criteria apply. ® Equity Finance Mortgage (EFM) and EFM are registered trade marks of ARES Capital Management Pty Limited ABN 93 113 861 046.