wat do the gurus of this site have to say about adelaide banks EFM?
It’s never been harder to buy a house in Australia, but now a new-style mortgage is offering hope to first-time buyers and investors alike.Just putting a roof over your head can soak up more than a third of your weekly income, and even then you can’t buy where you want because you just can’t afford it.
But what if you had a silent partner, who paid 20 per cent of the cost, and you didn’t pay one cent in interest on that portion of your loan?
It’s called an equity finance mortgage, the latest attempt to make it easier for people to get a foot on the housing ladder.
It works like this: say you need $100,000 to buy an apartment. First, you get a small deposit of $10,000 together. Then your equity partner invests 20 per cent, or $20,000, and you take out a regular mortgage of $70,000.
You never pay interest on your equity partner’s share, enabling you to borrow more than you could have, or keep your repayments much lower.
“Potentially it’s the most innovative product to hit the mortgage market in at least the last decade,” said Dennis Orrick from consumer advisory group Info Choice.
The only catch comes when you want to sell your house – the silent partner takes 40 per cent of the capital gain.
So if the house you bought for $100,000 makes $200,000 at sale time then $40,000 goes to your equity partner and you walk away with $60,000, in lieu of never having paid one cent in interest on this added investment.
Equity Finance Mortgages or EFMs will be launched tomorrow (13 March) by the Adelaide Bank.
And it might not be too long before other major banks pick up on the idea.
“We expect these loans to be available to 80 per cent of the population in every mainland capital city,” said the EFM’s inventor, Chris Joye.
The scheme is officially being launched by Adelaide Bank and Rismark International tomorrow but we were of the 6 Australia Brokers given the opportunity to trail the product prior to the official launch.
Might have seen my post earlier this evening
“Hi All
Many of you may have seen this evenings Today Tonight program on the exciting new Shared Equity Mortagge.
Clients of mine and fellow Property Investing .com members have been the first people anywhere in Australia to have had their loan approved today under this scheme.
Hopefully TT will do a follow up story later in the week about the couple and our Company.
Congratulations to Steve & Sarah and good luck in your new home.”
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Well it’s not a bad product. You could argue the pro’s and con’s of this product versus the popuar 100% home loan extensively – but overall anything that offers more choice to a consumer is a good thing, and this seems like an almost fair trade off…
I can’t imagine the target market. If I had no deposit for example, or even 10%, I myself (as a broker) would definately choose the mortgage insured product as opposed to the equity share, seeing as it’s 40% later… though, it could be a good investing tool…
No I don’t know – it’s good, I wouldn’t take it myself… It’s going to go off like a rocket tommorrow I reckon!!![thumbsup2]
yeh richard how good is the product??
Hello,
I would like to know how Adelaide Bank or Rismark profit from this?
From their point of view they give you say $50,000 and then have to cop all the interest on top of that.
I could buy a property and sell it 50 years later. The loan will sit idly on their books for all that time.
So whats in it for them????
Tom
In answer to the following question
I would like to know how Adelaide Bank or Rismark profit from this?
From their point of view they give you say $50,000 and then have to cop all the interest on top of that.
I could buy a property and sell it 50 years later. The loan will sit idly on their books for all that time.A) The maximum length of the loan is 30 years for the Adelaide Bank. Remember the first loan is a P & I loan so they collect from you interest for the 25 years so just like any other standard loan.
Rismark manage the Superanuation Funds and there profit is 40% of any capital increase. If the market stays flat for say 3 years and the value is the same as it was when you purchased the property then you have nothing to pay and you treat it as an interest / repayment free loan.Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Hello Richard,
A) That is obvious, I should have been clearer. I was only referring to the $50,000 EFM portion of the loan. Of course the remainder is a standard loan.
Could you please clarify the EFM / Rismark portion. Say I buy a house and never sell it???? What happens then??? Does Rismark force you to sell the property 25 years after the loan commenced???Hi Tom
No they will not force you to sell but like any other no evergreen loan it has a 25 year term so you would need to pay it out.
The property would be revalued and you would need to pay out the EFM and the 40% Capital gain. No real drama.
Rismark are manging the funds on behalf of a number of superanuation funds so they are quiet ok with a long term investment.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Rismark manage the Superanuation Funds and there profit is 40% of any capital increase. If the market stays flat for say 3 years and the value is the same as it was when you purchased the property then you have nothing to pay and you treat it as an interest / repayment free loan.You must be logged in to reply to this topic. If you don't have an account, you can register here.
