What is an EFM?

An Equity Finance Mortgage (EFM)® is a new type of home loan that can help you :

  • Reduce the upfront and ongoing costs of buying a home by up to 25% or more
  • Reduce your monthly loan repayments by up to 25% or more
  • Buy a 25% more expensive property.

It works in conjunction with a traditional home loan, currently an Iden EFM Fixed/Variable Rate 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 on an EFM loan, unless you are in default;
  • You are not required to make any monthly interest repayments throughout the EFM loan, which you can hold for up to 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).

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! 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:


THE BENEFITS OF EFM

In summary, an EFM® can help you:

  • Buy your first home sooner;
  • Buy a more expensive property or in a better suburb than you may otherwise be able to afford;
  • Get out of the renting cycle and into home ownership;
  • Reduce your current monthly mortgage repayments (via refinancing of your existing home loan);

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.

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). EFM loans are offered in conjunction with certain traditional home loans offered by approved lenders and their originators. Rismark has appointed Adelaide Bank Ltd ABN 54 061 461 550 AFS licence number 240516('Adelaide Bank') as an approved lender. Adelaide Bank and its originators ('Adelaide Bank originators') will distribute and manage EFM loans. Iden Group has been appointed as an Adelaide Bank originator. 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.® Equity Finance Mortgage (EFM) and EFM are registered trade marks of ARES Capital Management Pty Limited ABN 93 113 861 046.