Guarantor Home Loans :
Everything You Need To Know

GUARANTOR HOME LOANS

Don’t put your property dreams on hold. Have you considered a Guarantor home loan?

Struggling to save a deposit? Saving a decent home-buying deposit can be difficult and take time, especially if you’re renting. But there is a solution that could get you over the line sooner, having a family member Guarantor your loan.

With a guarantor home loan you may be able to borrow up to 105% of your property’s purchase price.

If you have someone in your life who can act as a Guarantor, a third-party home loan could be the perfect option for you. And the great news is, we know from experience that many people can remove the guarantee in 3 – 5 years.

Benefits of a Guarantor Home Loan

By having a Loan Guarantor, you may be able:

Borrow more;
Secure a lower interest rate; and
Avoid paying Lenders Mortgage Insurance (LMI).

How long does a Guarantor stay on a Mortgage?

A Guarantor will stay on your mortgage until your loan is refinanced, the loan is paid off, or you have built enough equity in your loan and have shown a history of servicing your mortgage repayments.

In some cases, depending on your lender’s specific policy, you may need to pay additional fees when requesting to release the loan Guarantor.

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What is a Guarantor Home Loan

Many lenders allow a family member (sibling, parent, spouse, de-facto, grandparent or even extended family member) to help you buy either an investment or owner-occupied property by providing additional security. The person providing this assistance is known as a Guarantor.

A Guarantor allows the equity in their own property to be used as additional security for your loan. It’s important for both the borrower and the Guarantor to understand the risks involved, as the Guarantor’s assets may be at risk if the borrower fails to make repayments.

The lender will still check that you can comfortably manage the mortgage repayments on your own, but a Guarantor home loan can fast-track you into a place of your own.

Example of how a Guarantor Home Loan Works

If you’re looking at purchasing a property valued at $700,000, most lenders require you to have a deposit of at least 20% ($140,000) or they will charge you LMI. Some first home buyers might wait to save the 20%, but you might already have saved $50,000 & can ask for your parents to offer $90,000 of their own home equity as an extra security for your loan. This will give you the 20% security you need to buy the property today without paying LMI.

Watch our Explanatory Video:

Guarantor Loan Requirements Australia

To be eligible as a Loan Guarantor, you must be family member of the borrower, have good credit rating, over 18 (typically under 65), have a steady income, and also own your own home in Australia (plus have sufficient usable equity in your property). That’s because the Loan Guarantor’s home equity forms part of the security for the loan.

Does a Guarantor need to secure the entire loan?

No, they don’t. Some lenders will allow a limited guarantee.

A limited guarantee means the loan Guarantor only needs to secure a part of the loan, rather than the entire amount. This will benefit the loan Guarantor from unnecessary risks, as they won’t be liable for the entire loan.

What are the implications for the Guarantor if the borrower can’t pay back the loan?

If you’re unable to pay back the loan, the lender can take legal action against you and in some circumstances, against your Guarantor. Your Guarantor will be liable for the amount specified in the guarantee.

Anyone who is considering being a Guarantor for a property loan should seek independent legal and financial advice before accepting the role. Most lenders will insist on this, prior to accepting a guarantee.

It is important to note that a Guarantor’s ability to borrow will be reduced after they have agreed to act as a Guarantor.

Is it possible to have multiple Guarantors for a Home Loan?

Yes, it is possible to have multiple Guarantors for a home loan, as this can provide additional security for the lender. However, the specific requirements and terms for multiple guarantors can vary depending on the lender and the circumstances of the loan.

CALCULATORS

Buying your first home can be tough. We get it.

At Shore Financial we have access to over 70 different lenders so you can rely on us to find the loan that’s the right fit for you – with the lowest possible rates.

How do I get started?

Without a doubt, the best way to find the home loan solution that is right for you is to have a talk with one of the team at Shore Financial. In a free, confidential consultation we can help you find a solution that is best fitted to your unique circumstances.

If you decide a Guarantor Home Loan is something you’d like to explore, you can start the conversation with your family member.

And remember, if a Guarantor Loan isn’t for you, there are still plenty of other options to consider. Learn more about low deposit home loans.

Brokers work for you

At Shore Financial, we’re passionate about helping our clients build wealth through property. And that starts from your very first property. Tailored customer service, better than you’ll find with any other broker, is our promise to you.

We’ll also be by your side through the buying journey, making sure you understand the process every step of the way. Our success is tied to your prosperity – so you can be assured that your best interests are our number one focus. You can also keep informed and up-to-date with current home loan data, economic data and trends by visiting our Shore Learn page.

Learn more about our team of home loan experts and how they can assist you on your property journey!

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Guarantor Home Loans :
Everything You Need To Know