Well, a family guarantee or family equity loan may be the solution.
The family pledge or family guarantor option, allows a family member to guarantee a specific amount of another family member’s new loan. This guarantee is supported by a mortgage over the family member’s residential property and would allow you to borrow up to 100 percent of the purchase price plus costs (solicitors, building & pest inspections, stamp duty, registration and establishment fees) in some cases you can also consolidate debts and do construction or renovations as well.
Once the loan to valuation ratio is 80% most lenders will release the guarantee and mortgage held over the property. Most lenders will limit the guarantee but every lender is different so speaking to a broker can help find you the lender to fit your requirements. Under a family pledge you would also not have to pay loan mortgage insurance.
Example of the setup of Family Guarantee Loans
Purchase Price of property is $400,000-00 plus costs $410,000-00.
Loan 1 $320,000-00 (80% of purchase property)
Loan 2 $90,000-00 secured by the available equity in Family Members property.
Independent Financial advice and independent legal advice is recommended by all the lenders and in most cases is required by the lender for the guarantor. The guarantor would also have to prove their ability to service the amount of the guarantee. The cost of the financial and legal advice would be an additional expense by the borrower.
Who can be a guarantor?
Most banks only allow parental guarantees but some lenders can consider guarantees from immediate family members such as siblings and grandparents.
Is this only available for first Home Owners?
No, all lenders are different.
Can it be for an investment property?
Yes, although not many lenders like this option.
Can there be an existing loan on the security property?
Yes, although not all lenders will allow this and there needs to be sufficient equity.
Can the guarantor be retired?
Yes, but if it is a principal place of residence then the guarantor normally needs to be able to confirm servicing of the guaranteed amount.
Loan Broker to the Aussie Battlers