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 Variable or Fixed 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:
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!
