Equity Finance Mortgage
This is a relatively new home loan product that has attracted plenty of attention, but is still not widely available. The equity finance mortgage is designed to work in partnership with a traditional home loan, and basically allows home buyers to, in essence, have a silent financial partner own part of the property, which reduces the expense for you until the time that their property is sold. Home buyers can generally borrow up to 20 per cent of a property’s value. There is no annual percentage rate unless the loan goes into default, and borrowers are not required to make regular monthly repayments on the EFM portion. These loans can be held for up to 25 years.
When you sell the property or settle the loan, you are required to repay the original EFM amount plus a percentage share of any increase in the value of the property. This percentage is calculated on the percentage of the property’s value that was originally borrowed (ie 20, 15, 10 per cent or another amount).
On the flipside, capital losses may be shared with the lender subject to certain conditions. This loan type is growing in popularity as it allows borrowers to reduce a property’s up front and running costs, as well as traditional mortgage repayments. It also allows buyers to invest in a more expensive property they might not have otherwise been able to afford.
EFM loans are specialised products and you should speak to your Mortgageport Consultant for more details.
