It is no longer possible to obtain a 100% home loan or no deposit home loan unless you can offer the lender some additional security. First home buyers, who are in most need of borrowing 100% of the purchase price, obviously don’t own another property to offer as a second security and therefore can’t borrow 100% unless they have some help. Regardless of whether you are a first home buyer or you have owned a home before it may be possible for you to borrow up 110% of the purchase price of a property if you have a relative who is happy to be your guarantor.
|For more specific information on guarantor home loans please call us on 1300 66 12 11 . If you would like to find out if you are eligible please complete our no deposit apply online form.|
Guarantor home loans have become very popular in recent times and there are a number of major lenders offering these. Each lender has given their guarantor home loan product a different name. Some examples are:
Family Support Home Loan
Family Equity Home Loan
Family Guarantee Home Loan
Family Pledge Home Loan
Fast Track Home Loan
In order to qualify for a guarantor home loan you need a relative, who either owns a property outright or has significant equity in a property, and is happy to act as your guarantor.
Here is a list of the important features and considerations of a guarantor home loan:
From the borrowers perspective
- You won’t have to pay mortgage insurance or a mortgage risk fee. This could potentially save you thousands of dollars
- You may be able to borrow the purchase costs such as stamp duty, solicitor fees and bank fees as well meaning you it is possible to purchase without any savings.
- The interest rates available are very competitive. The lenders that offer this type of loan generally offer it on all of their loan products including the cheap professional packages and basic variable home loans.
- The early repayment penalties on a guarantor home loan are generally not as harsh as they were on standalone no deposit home loans
- A guarantor home loan is often easier to qualify for than a 90-95% loan. The main reason for this is that a mortgage insurer doesn’t have to approve your loan so you are only subject to the banks policies
- Some lenders may allow you to consolidate your existing debt into the home loan if you wish to do that . A few of the lenders on our panel may lend up to 110% of the purchase price of a property to consolidate personal debt if you have a guarantor.
- Most lenders require your guarantor to be an immediate family member but we do have access to one lender who may consider a guarantor that is not a family member.
From the guarantors perspective
- Some lenders will allow your guarantor to limit the amount of their guarantee. If you borrow 100% of the purchase price the guarantee amount is usually 20-30% of the loan amount
- Generally, if you were to default on a guarantor home loan the bank would sell your property first in a mortgagee sale. If the bank makes a loss on the sale they could then make a demand on your guarantor to cover the loss, but only up to the amount they guaranteed. If the guarantor cannot pay the shortfall the lender could then take possession of their property to cover the loss. This is obviously the worse case scenario and would only occur if you as the borrower defaults on the loan.
- The guarantor is not liable for any scheduled monthly repayment amounts, only the shortfall (if there is one) if the borrowers property is repossessed.
- Once you have built up sufficient equity in your property you can apply to the lender to have your guarantors removed from the loan. If, for example, in a few years time you think that you property has increased in value, and/or you have paid a significant amount off the loan, you can then apply to have your guarantors removed. At that time in the future your loan balance must be 90% or less of the value of the property. The lender will organise a valuation of the property to determine this. If the loan balance is 80%-90% of the property value you can have your guarantors removed but you will have to pay a mortgage insurance premium. If the loan is 80% or less of the value then no mortgage insurance would be payable.
- All lenders require guarantors to seek independent legal advice before signing the guarantee documents. So the guarantor will need the assistance of a solicitor.
- The lender you select will take a mortgage over your guarantors property. So if the guarantors property is unencumbered (i.e. there is no debt against it) your lender will require their original certificate of title. If they have a mortgage against their property then your lender will take a 2nd registered mortgage over their property. Your lender will need to seek consent from the guarantors lender in order to take the 2nd mortgage and there will be a fee of about $150 to $300 attached to this.