Enter the EFM or Equity Finance Mortgage – it’s a new type of loan that has many applications in the current market. The EFM lender provides a loan for up to 20% of the value of the property and you don’t pay interest on this loan – unless in default on the main loan attached to your property. The EFM lender in return gets a 40% share of the increase in value of your property. If there is a loss in value when you sell, the EFM lender wears some of that as well.
How it affects you:
Home Buyers: If you could currently afford a unit worth $400K, with similar repayments and a 20% EFM you could buy something worth $500K - $100K of that would be the EFM which you don’t have to make repayments on. This could mean the difference between a place you are happy to live in for 5 years and a place you could live in for the rest of your life!
Relationship Breakup – this is a hard time for everyone involved and often neither party can afford to keep their family home due to the loan repayments. With the EFM product it could increase the affordability allowing someone to stay in their own home and give them some stability during a difficult time.
When does the EFM loan have to be repaid? – it has a 25 year term, so after that time you’d need to pay out the EFM lender.
As your personal mortgage planner I stay up to date with changes in lending products and I’m more than happy to discuss this and any other products with you. A big difference in using an experienced broker is that they know and can find which lenders cater for particular situations best.
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