Lending a Helping Hand – Loans with Guarantors
For many, entering the property market can seem like a daunting – and at times unachievable – goal. If you know someone who is feeling like buying a home is out of their reach, then using a guarantor on their home loan could be an option.
With rising house prices, saving a deposit is getting harder but with a guarantor loan your family and friends could achieve their goal of home ownership sooner.
A guarantor is someone who provides extra security by ‘guaranteeing’ a portion of a loan – usually the deposit. The guarantor can use the equity in their existing property (or funds on term deposit) as a guarantee, rather than offering a cash gift.
Who qualifies as a guarantor?
While it may vary between lenders, a guarantor is usually an immediate family member and can include:
- Parents and parents-in-law
- Spouse and de-facto spouse
- Siblings – brother, sister and brother-in-law, sister-in-law
- Legally appointed guardian
When is using a guarantor suitable?
- If a borrower doesn’t have a big enough deposit saved to meet bank criteria.
What are the benefits of having a guarantor?
- Buying a home sooner
- Saving on extra interest charged for low deposit home loans
- Potential to borrow more funds than may have been possible otherwise
- Eliminate the need to pay for Lender’s Mortgage Insurance or low equity fees
Remember both borrower and guarantor must provide information about income and any current debts. Importantly, it’s recommended that legal advice is sought by both borrower and guarantor.
There are many options out there that specifically support guarantor loans. Each lender and every loan product will be different so it’s important to do your research and find the right deal to suit the needs of both borrower and their family guarantor.
I am very experienced with guarantor loans and can offer advice to make sure that you get the right option for you. Please contact me to discuss options.