OWNING A HOME IS STILL THE GREAT AUSTRALIAN DREAM.
But for many, buying that home, whether it’s your first home or a subsequent one, feels just out of reach. For others, managing home loan repayments can sometimes become a struggle or simply just prevent you from doing some of the things you want to do. Now there is a new home loan available that can help you reduce your home loan repayments or even purchase a more expensive property than you may otherwise be able to afford. An Equity Finance Mortgage (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 term of the EFM loan. 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. 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. Read on for some examples of how an EFM can help you!
BUYING A HOME - TWO WAYS TO BENEFIT.
Whether you’re looking for your first home or a bigger home, an EFM can make the journey easier.
The break you’ve been waiting for. Reduce your monthly loan repayments by up to 20%!1
Jack and Adrian want to purchase a home for $400,000. They have a $20,000 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 $380,000 using a traditional home loan which would require them to repay $2,883 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: | $20,000 | | Loan needed: | $380,000 | | Traditional home loan (95% of property value): | $380,000 | | Lenders Mortgage Insurance premium: | $7,471 | | Monthly repayments required: | $2,883 |
ADDING AN EFM TO MAKE PURCHASING A HOME AFFORDABLE | Property Value | $400,000 | | Deposit: | $20,000 | | Loan needed: | $380,000 | | EFM (20% of property value): | $80,000 | | Traditional home loan (95% of property value): | $380,000 | | Lenders Mortgage Insurance premium: | $4,652 | | Monthly repayments required: | $2,276 |
Adding an EFM reduces the monthly repayments required on
a traditional home loan by up to 20%. Example excludes application fees and other fees associated with the loan such as valuation fees, account keeping fees and transaction fees as well as transaction costs associated with purchasing a home such as stamp duty and government fees.
By using an EFM in conjunction with a traditional home loan and agreeing to share any future increases in the value of their property, Jack and Adrian have made their
purchase more affordable by reducing: - their regular monthly home loan repayments by $607 a month
- the Lenders Mortgage Insurance premium by $2,819
For the assumptions used in calculating this example please refer to the back cover of the brochure. Monthly loan repayment comparisons may vary depending on changes to these assumptions. Please download our EFM Brochure for more information or please contact us today. 1Based on the example ‘ADDING AN EFM TO MAKE PURCHASING A HOME AFFORDABLE’ shown in the brochure. Depending on individual circumstances an EFM may not reduce your total loan repayment. |
