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Since no annual percentage rate is applicable to your EFM loan (unless you are in default), and you do not make any ongoing monthly interest repayments during the term of the EFM, you must agree to share with the EFM lender a minority proportion of any increase in the value of your property over time.
This happens when you repay your EFM.
For example, if your EFM was for 20% of the property's value, you will have to give up 40% of any increase in its value when you sell the property or repay the EFM for some other reason. You will get the major share (ie, 60%) of any increase in the value of the property.
On the other hand, when it comes time to sell your property, and you realise a loss, an EFM allows you to potentially share that loss and reduce the amount you have to repay by up to 20% of the decrease in the property’s value.
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 (ie, via a sale of your home).
If there has been no growth in the value of your home during the term that you have held the EFM, you simply repay the original principal loan sum with no interest whatsoever.
The table at the bottom of the page sets out the percentage of the property value that you can borrow and the corresponding percentage of any increase or decrease in the value of the property you share in the future.
Remember Jack and Adrian - they took out an $80,000 EFM and a $280,000 traditional home loan to purchase a $400,000 property. The following graph shows you what they would have to repay, and how much equity they would have in their property at 3, 6 and 9 years if its value increased by 7% per annum. Of course property values may increase by more or less than 7% per annum and this will impact the outcomes.
 This area shows the total amount owing on the EFM including the appreciation payment.
 This area indicates the amount of equity Jack and Adrian have in their home and will keep.
 This area shows the total amount owing on the traditional home loan.
The EFM has no monthly repayments required... | | | EFM loan amount as a % of property
value (LVR) | The share of any
increase in value you
pay to the EFM lender in the future | The share of any
increase in value you
keep on your home in the future | The share of any
decrease in your property's value the EFM lender may bear in the future* | | 20% | 40% (lender's share) | 60% (your share) | 20% | | 15% | 30% (lender's share) | 70% (your share) | 15% | | 10% | 20% (lender's share) | 80% (your share) | 10% |
In order to help you understand how the EFM product works, we have had the leading consumer information company, InfoChoice, develop an EFM comparison calculator and an EFM repayment calculator. You can click on these links to use the calculators.
These tools will help you compare an EFM to a normal home loan or work out the future repayments that you might need to make under an EFM.
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.
* Assuming that you sell your home for a loss, have held it for more than 12 months, did not refinance into or out of the EFM, and that you are not in default.
Please carefully read and review the EFM Disclosure Document available on this website or through one of our accredited lenders. This website does not take into account your personal objectives, financial situation, or particular needs. You should obtain a copy of the EFM Disclosure Document (available on this website) and the EFM Terms and Conditions Booklet from one of our accredited lenders and consider them before making a decision about whether to enter into an EFM. |
Copyright 2008 Rismark International. All rights reserved. Fees, charges, terms, conditions and lending criteria apply. Full details are available on application. EFM loans have been developed by and will be provided by Rismark International Funds Management Ltd ABN 15 114 530 139 AFS licence number 293881 (trading as Rismark International) ('Rismark', 'we', 'us' or 'our'). EFM loans are offered in conjunction with certain traditional home loans offered by approved lenders and their originators. Rismark has appointed Adelaide Bank a division of Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFS licence number 237879 ('Adelaide Bank') as an approved lender Adelaide Bank and its originators ('Adelaide Bank originators') will distribute and manage EFM loans. Rismark has consented to Adelaide Bank and Adelaide Bank originators branding EFM loans as Adelaide Bank or Adelaide Bank originator-branded EFM loans. Rismark may over time also appoint other financial institutions to distribute and manage EFM loans. Rismark has appointed Permanent Custodians Limited ACN 001 426 384 ('Permanent') as lender of record, custodian and mortgagee for Rismark. This means Permanent will enter into the EFM loan contract and Mortgage on behalf of Rismark.(R) Equity Finance Mortgage (EFM) and EFM are registered trade marks of ARES Capital Management Pty Limited ABN 93 113 861 046. TM Equity Finance Mortgage is a pending trade mark of ARES Capital Management Pty Limited ABN 93 113 861 046. ARES Capital Management Pty Limited's ABN 93 113 861 046 intellectual property relating to the EFM product is protected by Australian Innovation Patent Numbers 2005100 871, 2005100 869, 2005100 868, 2005100 867, 2005100 865, 2005100 864, 2007100 445, and 2007100 448.
