A Guarantor Loan is like a normal home loan except that somebody has agreed to offer a guarantee to the lender that the loan will be repaid. First home buyers with little or no deposit often need their parents or family member to guarantee their application in order to ensure approval. Come to our info sessions and get pampered with lots of assistance to help you on your journey to purchasing your golden patch in Australia.
The guarantor is liable in the event that the borrower cannot repay the debt. In the event that the loan cannot be repaid, the lender will generally sell the borrowers property and the guarantor will be liable to pay the remaining amount.
Over 80% of first home buyers get some type of help from anyone when buying a property. This is usually in the form of giving them a deposit as a gift or by guaranteeing their home loan.
Every lender seems to have come up with their own name for guarantor loans! “Family Pledge”, “Family Support” , “Family Equity”, “Family Guarantee”. Confused yet?
Don’t worry, they all mean essentially the same thing. Most of these terms refer to a security guarantee, as only a few select lenders allow other types of guarantees. There are big differences between the bank’s credit guidelines, loan types and discounts for family guarantee loans.
Most banks will only allow parental guarantees, i.e. a guarantee from the borrower’s parents. Some lenders can consider guarantees from immediate family members such as siblings, grandparents, spouses, de facto partners or adult children. This is because banks want to make sure that the guarantor has a strong relationship with you. Trusted Mortgage Broker has a bank on our panel of lenders who will permit the guarantor to be anyone.
Guarantors have a fixed liability and can only be pursued for the agreed guaranteed amount, making this a more secure option. The limited guarantee can be secured by either their property or a term deposit.
They do not have to make the scheduled loan repayments and the guarantee can be released upon request if, at a later date, the borrower meets standard bank criteria and the bank agrees.
Ultimately you do not want the guarantee to be in place for the entire term of the 30 year loan. Most people are able to remove the guarantee somewhere between 2 and 5 years after they initially set up the loan, although this can vary significantly. Because many guarantees are set up because the borrower has no deposit, removing the guarantee most often depends on how much the property appreciates in value and how much in extra repayments the borrower can afford to make. Normally the guarantor is removed when the borrower owes less than 80% LVR of their property.
Come to our info sessions and get pampered with lots of assistance to help you on your journey to purchasing your golden patch in Australia.
Trusted Mortgage Broker has a great range of mortgage calculators to help with all those tough decisions that come with finding the right loan. Have a look at our calculators on our website to help you further.www.trustedmortgagebroker.com.au/calculators/
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