Under the EFM, the maximum share of the capital gains the lender is entitled to is capped at 40% (assuming you take a 20% EFM). This means that the home owner always keeps at least 60% of the growth on their property.

If you only take out a 15% EFM (as a percentage of the value of your home), the lender's maximum share of the capital growth is capped at 30%, leaving you with 70% of the growth. 

The developers of the EFM believe that the home owner should always enjoy the lion's share of the growth on their property.

Since the EFM lender does not require any interest or principal repayments on the EFM during its maximum 25 year term, the only return the lender gets is through capital growth. In this way, the EFM lender only does well if the home owner does well. If the home owner suffers and the value of their property does not grow, or even falls, the EFM lender gets no return whatsoever. All the borrower does is repay the original EFM principal amount that was lent to them when they entered into the loan.

Under the EFM, if the home owner suffers a loss when they decide to sell their property and repay the EFM, the EFM lender will bear up to 20% of that loss with them (assuming they take out a 20% EFM).

This means that the amount the borrower actually repays the lender when they realise a loss on their property could be less than what the lender originally advanced to them. And they will have paid no interest on the EFM throughout the duration of the term.

Note that if the value of the borrower's home has fallen but they have not sold their property (i.e., they have just refinanced out of the EFM while still living in their home), the EFM lender does not share in this "hypothetical" loss. The philosophical approach here is that the EFM lender shares in losses when the borrower also shares in those losses. The EFM lender does not share in "paper" losses.

If there is no growth in the borrower's property when they repay the EFM, they simply repay the original principal loan amount with no interest whatsoever. In this scenario, the EFM would have been a costless form of finance.

The EFM lender strongly recommends that the borrower obtains independent legal and financial advice in relation to the EFM loan prior to entering into the EFM loan contract.

For further details, please refer to the EFM Disclosure Document available on this website.

The EFM Disclosure Document explains what an EFM is and how an EFM loan can help you to purchase a home when it is taken in conjunction with a traditional home loan, or how an EFM loan can be used to refinance an existing home loan or consolidate other debts.

The EFM is only available through fully accredited mortgage managers, mortgage brokers and financial planners who are qualified members of the MFAA.

This accreditation process involves a testing regime which the participants must pass in order to be able to offer the EFM product.

The EFM lender has instituted a comprehensive dispute resolution process. If the borrower is not satisfied with the outcome of a dispute having raised this matter with the person who arranged the EFM for them, they can contact one of the lender's Customer Relations Officers on (08) 8300 6111 or toll free on 1800 266 233 Monday to Friday between 9am and 5pm (central standard time), or by writing to Customer Relations (723), Adelaide Bank, Reply Paid 1048, Adelaide SA 5001, or emailing at customerrelations@adelaidebank.com.au.

Adelaide Bank will have a consultant with the experience and authority necessary to handle the matter contact the borrower within 48 hours of receiving your concern.

If the borrower is still not satisfied with the concern in question, they can take the matter to the Financial Ombudsman Service (FOS). The FOS will take on cases after the borrower has exhausted the lender's complaints procedures. As a general rule, the FOS will consider a dispute if the loss the person is claiming is less than $280,000. The borrower can contact the FOS at: GPO Box 3, Melbourne Vic 3001, Tel 1300 780 808 Fax (03) 9613 7345.