Family Guarantee Home Loans – What to Know

Family guarantee home loans, a great solution for first home buyers to enter the property market without a deposit!

The prices in Australia are spiking up like never before in recent years, which is why purchasing homes, paying for rent, or saving up a deposit has become more daunting than ever. If you look into the numbers, you’ll find it challenging to acquire a sizable 20% deposit for first-time buyers as the median house price in capital cities is more than ever. If you’re struggling to meet the costs and are looking for alternative options to enter the current market, acquiring family guarantee home loans offers the best solutions.

What Are Family Guarantee Home Loans?

You can assign anyone, preferably close relatives, to act as a guarantor for those who need additional security in your home loan. It caters to first-time home buyers who can meet other required payments but have little to no deposit as the guarantor will provide a portion of the equity in their property to secure your loan.

To that end, family guarantee home loans works by providing the following:

  • The guarantor’s property will serve to assist you in securing your 20% deposit for a property. The lender will use the guarantor’s property as security to cover the deposit however nothing actually comes out of their pocket nor does their mortgage balance/limit get affected.
  • In case the borrower can no longer continue the payment, signing a guarantee means that your guarantor will have to pay back the portion of their loan they are guaranteeing, with some lenders the loan entirely.
  • The lender can remove the guarantor once you, the borrower, pay off a portion of the loan or when the value of the property increased to meet the bank’s lending policies. Additionally, the lender can also relieve the guarantor’s responsibility if the home buyer’s debt level is below 80% loan to value ratio.

Who can Act as Your Guarantor?

As mentioned above, lenders generally prefer immediate family members to act as the borrower’s guarantor for family guarantee home loans. This includes parents, spouses, siblings, and even parents-in-law, stepparents, grandparents, aunts, and uncles. However this differs from lender to lender and should the guarantor not be your immediate parents or siblings, stricter policy applies.

What are the Requirements You Need for Family Guarantee Home Loans

Lenders are strict regarding family guarantee home loans, so keep in mind that there are specific requirements necessary before your application is subject under approval. This is to ensure that the guarantors understand the weight of their obligations, as well as to protect them from suffering from costly consequences in the unfortunate event that you fail to meet the payments.

With that in mind, borrowers must provide the following:

  • Outstanding credit history
  • Stable job
  • Steady income
  • The ability to pay the entire loan with their income

Guarantors, on the other, must provide the following evidence:

  • Good credit history
  • Strong asset and reliable equity position

If you want the loan to run smoothly, you have to take the time to prepare all the necessary documents to ensure that you and your guarantor will meet all the strict lending criteria.

Having a trust-worthy family member act as a guarantor for your home loan is an excellent way of purchasing a property faster. It also steers away borrowers from paying Lenders Mortgage Insurance, while your relatives themselves don’t have to pitch in their funds in the process.

However, utilizing family guarantee home loans is a decision that both parties cannot take lightly. If anything were to go wrong, the guarantor could suffer a significant financial burden as a part of their property is on the line. That’s why it’s essential to take the time to consider all possibilities before concluding.

If you’re looking for family guarantee home loans in Australia, engage the services of a mortgage broker at Highline Lending 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. 

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Whether you’re a first home buyer looking at entering the market or an existing home owner looking at ways to save money on your home loan, we have you covered. We’ve put hundreds of hours of research into these guides to ensure you end up ahead, and it’s completely on the house.

So, why use Highline Lending for your home loan?

We meet for a consultation, obtain your supporting documents and proceed to structure and package your application for approval knowing exactly what the banks want to see. We also monitor your home loan post approval ensuring you’re home loan suits you and your financial position

We get paid a commission from our lenders as a result of introducing your business to them. Subsequently, our service is at no cost to you. Our commission does not affect your interest rate whatsoever, if anything, we’re in a position to get you a lower interest rate than the general public due to our relationships with our banks

With our many years experience in the industry, we’ve been exposed to both easy and complex loan scenarios. Each loan we process gets presented to over sixty financial institutions, ensuring we have explored all options possible and are able to provide a solution