Lending a helping hand
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 homeownership 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 as a guarantee, rather than using their savings upfront.
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
What are the benefits of going guarantor?
- Buying a new 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
Remember both borrower and guarantor must provide information about income and any current debts. Importantly, it’s recommended that independent 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.