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An Equity Finance Mortgage (EFM)® is an award-winning home loan that can help you to: | • | Reduce the upfront and ongoing costs of purchasing a new property; or | | • | Reduce your current monthly mortgage repayments (via a refinancing of your existing loan); or | | • | Buy a more expensive property than you may otherwise be able to afford. |
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 Minister 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! |
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.
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.
