Why you MUST use a parental guarantor home loan if you’re a first home buyer!

With house prices shooting up and down, anyone who hasn’t gotten their hands in the market for homes is in for a rough ride. For those who do not have the wealth built up to invest in properties, all might seem lost. However, there is one thing that we can do, and that is to rely on a family guarantee home loan. By getting one of your relatives to pledge their equity, you can land the dream house of yours.

Here are the three main advantages of using a family guarantee home loan to enter the property market as a first home buyer:

1. You Can Borrow More Money

As you might know, when taking out a loan, most lenders will require you to deposit at least 20 per cent of the total loan for the request to be approved. However, there are still some other loans that allow a deposit lower than the 20 per cent mark. Those are only available if you are eligible for Lenders Mortgage Insurance or LMI for short. This type of insurance covers the lender in the case that you cannot meet your payments. However, taking out money for LMI can be quite costly, and should be avoided, especially if your income isn’t high.

With family guarantee loans, if you couldn’t hit the 20 per cent deposit mark before, now you can. In other words, you can borrow as much as you need to cover the rest of the deposit you couldn’t in the beginning, allowing you to secure the entire cost of the deposit. You can even borrow out the money to pay for the house entirely + additional costs such as stamp duty, legal fees and even extra money for renovations!

Of course, this doesn’t mean that you’re free from monthly payments. You’ll still have to pay back the lender, you’re essentially using the sufficient equity in your guarantor’s property and providing this as security to the bank with your new purchase! Better yet, as soon as your new loan is sitting at or below 80% loan to value ratio, your guarantor’s property can be released from your loan!

2. You Can Enjoy First Home Buyer Benefits

Because you are now able to purchase a home, you can enjoy first home buyer benefits like others who have bought a home before you. Benefits, such as a first home buyer grant and the stamp duty concessions are rewarded to you, and all of these can pile up to thousands of dollars in value.

3. You Can Avoid Unnecessary Fees

If you end up borrowing money that totals over 80 per cent of the value of your property, an LMI is generally required to be taken out. This is to guarantee the lender that in the event you cannot pay back the amount you’ve borrowed, the lender is cushioned from the blow.

But of course, getting an LMI is extremely expensive. A family guarantee loan can cover that 20 per cent, meaning that you’ll have to borrow only 80 per cent of the money to cover the rest of the cost and not more. As a result, you buy yourself home without having to take out the costly LMI.

The property market isn’t the most straightforward thing to understand. Because of that, there is plenty of planning, strategizing, and understanding of the risks you’re about to face to be done. Only that way, and with proper discussions with all the relevant parties such as your guarantors, you can ensure that the purchase of your home is smooth sailing.

Engage the services of a mortgage broker to aid you through this process from start to finish. We’ll take a look at your financial position and put a plan in place to ensure your home loan gets approved in the most beneficial way for yourself.  Contact us on 02 9121 6247 or submit your scenario online.