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By using an EFM in conjunction with a traditional home loan, you can significantly reduce the upfront and ongoing costs of purchasing a new property (subject to all the necessary credit approvals etc). The example below shows how...
Jack and Adrian want to purchase a home for $400,000.
They have a $40,000 deposit and sufficient additional funds to meet most of the costs associated with the purchase, such as stamp duty on the transfer and conveyancing costs.
They could borrow $360,000 using a traditional home loan which would require them to repay $2,510 per month in regular home loan repayments or they could take advantage of an EFM to reduce their monthly repayments. Here is how an EFM could work for them: Traditional Home Loan only | | | Property value: | $400,000 | | Deposit: | $40,000 | | Loan Needed: | $360,000 | | Traditional home loan (90% of property value): | $360,000 | | Lenders Mortgage Insurance premium: | $5,400 | | Monthly repayments: | $2,510 |
| Adding an EFM to make purchasing a home affordable | | | Property value: | $400,000 | | Deposit: | $40,000 | | Loan Needed: | $360,000 | | EFM (20% of property value): | $80,000 | | Traditional home loan (70% of property value): | $280,000 | | Lenders Mortgage Insurance premium: | $3,560 | | Monthly repayments: | $1,952 |
Adding an EFM reduces the repayments required on a traditional home loan by up to 20% The illustration above shows that by using an EFM in conjunction with a traditional home loan, Jack and Adrian have made their purchase more affordable by reducing:
| • | their regular monthly home loan repayments by $558 a month; and | | • | the Lenders Mortgage Insurance premium by $1,840. |
As we explained earlier, instead of charging a regular interest rate on the EFM, the lender is entitled to share in a minority of the capital gains on your property, as determined when you choose to repay the 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.
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.
Note: This example excludes application fees and other fees such as valuation fees, account keeping fees, transaction fees and lenders mortgage insurance (if applicable) as well as transaction costs associated with refinancing a home loan such as stamp duty, government fees, conveyancing fees and stamp duty on lenders mortgage insurance. For any additional assumptions used in calculating this example please refer to the assumptions page. |
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.
