When you’re desperately trying to save up a deposit for a home and just see the prices of property climbing and climbing, it’s difficult to remain patient.
But there is another way: a guarantor can help.
If you don’t have a substantial deposit for a home loan, there are still a number of ways to obtain credit. These are known as family pledges or security guarantees.
Borrowers who have a limited deposit often use this approach. In this situation, a relative or friend (usually a borrower’s parent or parents) is prepared to use the equity in his or her own home to guarantee the deposit of the borrower.
For example, for a total loan amount of $600,000, in a security guarantor situation the borrower/s would take on the debt of 80 per cent of the value of their loan, which would be $480,000, in their own name/s.
The loan for the balance, $120,000, is then guaranteed in the names of the guarantor/s and borrower/s, limiting the guarantor’s liability while providing security for the lender, meaning that lender’s mortgage insurance is not necessary.
This is a very popular way of first home buyers entering the property market, It works well when borrowers don’t have a substantial deposit, but their parents own their own home. It’s a great option as long as the parents are comfortable with their child’s ability to pay back the loan.”
To find a solution that will help you own your own home sooner, speak to us today.
