Okay here is my scenario (mum and dad investors scenario), will try and keep it fairly open to avoid it being a niche group of people:
Bazza and Shazza are a defacto/married couple living in a home they bought 6 months ago for $240,000. The house they bought is relatively new and while it will need regular maintenance, they have no plans to renovate anything dramatically. They are both working full time (avg wages ie $45k each) with a 12 year old son (Dazza) who is about to start highschool.
They have saved up enough money for a deposit for another property and they are interested in going ahead with a second purchase if they can afford it. They see a broker/bank and ask about finance and they are happy to finance it. Bazza/Shazza look around for a property, but can only find negatively geared properties, which will be great for the tax benefits, however with Dazza starting in a private high school next year, they feel the extra $100 per week they will be out of pocket for the property will be too much with the extra expenses. They also don't want to reduce their lifestyle, they enjoy regular meals out as a family and don't want to change these luxuries. In steps the efm....
Their repayments are currently $1650 (approx?), they refinance their home with the efm, reducing their monthly payments on it to $1320. Giving them an extra $330 per month to contribute to an investment property with a cash flow situation that they feel comfortable with.
So they have can now afford an IP that they wouldn't have otherwise bought. So let's compare this situation over 10 years (assuming that they pay it out after 10 refinancing to a regular loan from then forwards), once with the EFM + extra property and once without the EFM without the extra property.
Without the efm:
PPOR Value: $240,000
10 years pass
PPOR Value: $480,000
Total CG into owners pocket: $240,000
With the efm:
PPOR Value: $240,000 (Regular Loan = $200,000, EFM = $40,000)
IP Value: $200,000
10 years pass
PPOR Value: $480k + $32k (interest saved from having EFM) - $96k (40% of CG to Rismark)
IP Value: $400k
Total CG into owners pocket: $366,000
What do you think....
Where are the flaws in the scenario...
I am genuinely asking, if I am missing something blatantly obvious please point it out.