Guarantor Home Loan
With the help of a guarantor (family pledge) home loan, you can borrow over 100% of the purchase price.
Why consider a Guarantor Home loan?
With the help of a guarantor, you can borrow over 100% of the purchase price. This will allow you to buy a home and pay for purchasing costs such as stamp duty and legal costs.
Guarantor loans have several benefits:
- You do not need a deposit, allowing you to buy a home now.
- Save money as there is no LMI (Lender Mortgage Insurance) premium to pay.
- Some lenders may also allow you to consolidate other small debts such as credit cards or personal loans, into the home loan.
How much can I borrow?
Some lender that allows you to borrow up 110% of the property value. This will cover costs associated with purchasing a property.
How do they work?
Your guarantor will provide a guarantee for your home loan which is secured against their property. (Home or investment property). In most cases, this is your parents assisting you to buy your first home.
Who can be a guarantor?
Most lenders will only allow parental guarantees. Some lenders can consider guarantees from immediate family members such as grandparents or siblings. Friends, workmates or associates are not normally accepted.
What if the guarantor already has a home loan?
That’s okay, as long as they have sufficient equity they can still secure a guarantee on their property using a second mortgage.
The total debt secured on the guarantors’ property cannot go over 80% of the value of their property.
For example, if your guarantor had a home loan with $150,000 owing and they needed to give a limited guarantee of $125,000. The total debt secured on their property would be $275,000. To keep the LVR (Loan to Value Ratio) at 80% their property must be worth $345,000 or more.
What if my parents are retired?
Some lenders can accept guarantees from people who are retired, pensioners or self-funded retirees over the age of 65 years as long as they obtain legal advice.
When can I release the guarantor?
As your home increases in value and you pay off your loan then you then can consider releasing the guarantor.
The loan may have a term of 30 years, however, we can help you work out a strategy and structure your home loan so you can release the guarantor in the quickest possible time, this could be in as little as 2 to 5 years.