Guarantor Home Loans
Strap yourself in for some parental guilt trips
The Stormi of home loans
Have you been eating soggy sandwiches and drinking bad instant coffee at work, but still haven’t scraped together enough for your deposit? Chill, there’s another way. Guarantor home loans can magically get you over the line by adding another person to the deal – it’s like the third wheel you actually want on your date!
Spill the tea – what’s the deal with guarantor home loans?
It’s time to call Mum… Maybe start by asking how her day was?
Guarantors support your loan by using some of the equity from their own property. The equity is generally limited to 20% of the purchase price of your home. Generally, if they’ve paid off 50% of their own loan, then you’ll be sweet! (Now you’ll be glad Dad only bought you icy poles instead of Cornettos.)
This deal lets you avoid scary expenses like Lenders Mortgage Insurance (LMI), and you can actually borrow up to 100% of your new home’s price! So, instead of settling for a shoebox-sized house with neighbours you can hear showering, you’ll get that beauty with the huge ensuite for self-care Sunday.
One (kinda important) side note: Your parents will have to pay back the amount they’ve guaranteed if you can’t – but don’t stress, once you’ve got enough equity of your own and refinance, Mum and Dad are off the hook.
Seems too good to be true. How does it all work?
Here’s an example: Say you’ve been saving like crazy, and you’ve managed to pull together an impressive $50k deposit, and that dream house you’ve got bookmarked is worth $500,000. That’s only a 10% deposit, so you’d be stuck with a depressing LMI on the remaining 10% – say goodbye to Friday night passionfruit martinis…
On the other hand, a guarantor could offer $50,000 (that extra 10% you need) of their home equity, which lifts you up to 20% and saves you that LMI. Bring on the cocktails!
If you didn’t quite make your savings quota, a guarantor could provide $100,000 of their home loan equity, and then you wouldn’t need any of your own money for the deposit. You can just cover any fees.
Help me decide!
One size doesn’t fit all. Give us your deets below and our finance smarties will work out if this is the right loan for you.
Here’s a few As to some Qs you may have.
Who is a guarantor?
Guarantors are very generous individuals that support your loan by using the equity from their own property. Who’s your guarantor though? That’s totally up to you but most banks request that they’re an immediate family member (Mom & Dad we’re looking at chu)! Time to start showing up for the family dinners and the sweet talking the ‘rents.
Can someone be a guarantor twice?
Yes, as long as your guarantor has enough equity in their property (not to mention is super generous). How will you find out? By chatting to our team of number wizards, ofc!
Who can be my guarantor?
Guarantors are generally limited to being immediate family or spouses. Just remember if you can’t afford to pay your loan it falls on them. Pick wisely, no one needs more family dramaaa.
Can I change my guarantor?
Unfortunately, no. However, you can remove them if you own 80% of your home (go you!), or if you want to add Lenders Mortgage Insurance onto your mortgage. Not sure what the best option is? Our team of number smarties can help point you in the right direction.