Information, money saving tips and commentary on Equity Finance Mortgage Loans in Australia

Equity Finance Mortgage Home Loan

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What is an Equity Finance Mortgage Home Loan?

Essentially an Equity Finance Mortgage it is a home loan offering for owner occupiers only, where you joint venture with your lender. Your lender takes a stake in your property in lieu of regular monthly repayments or interest during the life of your loan. At end of the loan period you still owe the full amount of the original loan.

When you come to sell your property or pay off your loan, you repay the original amount borrowed using the Equity Finance Mortgage plus up to a 40% share of any increase in the value of your property. Conversely, if you ever have to sell your property at a loss, your lender will possibly share up to 20% of any realised loss on your property. There are rules about who you can sell to if you have to realise a loss, including, not selling to a related party.

Application procedure is similar to all other home loan types. So Lenders Mortgage Insurance may be payable if your LVR is not within your lender's guidelines. By using an Equity Finance Mortgage in conjunction with a traditional home loan, it is possible to reduce monthly loan repayments by as much as 25% from what you would other wise have to pay, using a traditional home loan only.

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Equity Finance Mortgage Home Loans

Features of Equity Finance Home Loans

With an Equity Finance Mortgage Home Loan You can borrow up to 20% of a property's value using an Equity Finance Mortgage.

You will pay no debit interest or make any regular monthly repayments on your Equity Finance Mortgage for the entire life of the loan, which can be up to 25 years. It can be used in conjunction with a standard home loan, but if you default payments on the standard loan you may be up for debit interest on the Equity Finance Mortgage.

Benefits of Equity Finance Mortgage Home Loans

  • Help you leverage into a better home in an area of your choice.
  • Cut current mortgage repayments with a full or part refinance of a standard loan.
  • Can help reduce up front cost of lenders mortgage insurance premium and ongoing repayments on a new home purchase.
  • No repayments unlike a principal and interest loan.

Tips and strategies

  • Avoid loans with monthly account fees
  • Use an EFM to buy a more expensive property while keeping your repayments at a level you can afford. For example: if you have saved a deposit of $150,000 to buy your home and you have been approved to borrow to a limit of $400,000, you could purchase a home up to a limit of $550,000. If you use an EFM with a traditional home loan of $400,000 your limit can improve to $687,500. The EFM would be $137,500 or 20%. This can be the difference between the beachside retreat you always wanted and the ex trust home you could otherwise afford.
  • If for any reason you are finding it tough to meet your current mortgage repayments, refinancing to an EFM may just provide the relief you need. For example: If your current home loan is $350,000 on a property valued at $550,000 and your current monthly repayments are $2,818, you could free up approximately $850 per month by refinancing $110,000 of your current loan to an EFM. What could you do with that extra $200 a week?

Example Rates and Fees

Equity Finance Mortgage Home Loan NO FEES (October 2012):
  • Monthly fee NIL
  • Annual fee NIL
  • Redraw fee NIL
  • Extra Payment fee NIL
  • Fixing fee NIL

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Thank you for visiting our Equity Finance Mortgage Home Loan web-page. We hope the overview has proved useful.

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