Shared appreciation mortgages
Innovative solutions
Known as Shared Appreciation Mortgages or Equity Finance Mortgage
(EFM), the product has been developed to help make buying a
home more affordable. This innovative product has been developed
to help make buying a home more affordable. It’s appeal
will be for
- First home buyers lacking sufficient funds for entry
into the home market by reducing the upfront and ongoing
costs of purchasing a new property
- Reducing monthly home loan repayments
- Allow buyers to upgrade and purchase a more valuable property
than they otherwise be able to afford
- Existing home-owners looking to refinance using the equity
in their home to raise cash for other purposes or reduce
monthly home loan repayments
This product is only available to owners who live in the
property they are using as security.
How does it work?
A shared appreciation mortgage works in conjunction with a traditional
home loan offered by the same lender. The traditional portion
is like any other home loan where interest is calculated daily
and charged monthly.
However, you do not pay ongoing interest on the shared equity
portion of the loan. Instead of paying interest, you give
up some of the capital gain on the property. The shared equity
portion is repaid when you sell the property or elect to repay
the shared appreciation mortgage, at which time the original
shared appreciation amount borrowed plus up to 40% of the
increased value is paid to the lender. If the property deceases
in value, the lender will share a portion of the loss.
You retain full title and ownership of your property.
The governments of Victoria, South Australia and Western
Australia have announced shared equity schemes.
As this is a relatively new product, it is strongly recommend
that you obtain independent legal and financial advice in
relation to this product before entering into a loan contract.
| 
