Family can help you getting a home without a deposit

Family Guarantor home loans have become very popular in recent years as saving a deposit can be daunting. It takes the average couple nearly 5 years to save a deposit, and almost half end up needing help from family. In the meantime, house prices just keep going up.

With guarantor home loans, you will be able to borrow 100% of the purchase price of a property.

How does a family guarantee work?
A family guarantee allows you to use the equity in your parents’ property or another family member’s property as security on a home loan. Guarantors are limited to immediate family members, including parents, grandparents and siblings.

What are the benefits?

• Allowing you to get into the property market sooner.
• Save money by not paying the Lenders Mortgage Insurance (LMI), generally due to the loan is greater than 80% of the property value.
• You still eligible the First Home Owners Grant (FHOG).
• You can consolidate some minor debts, such as credit cards.
• You can limit the amount of the guarantee.

What are the drawbacks?

• Putting the guaranteed property at risk.
• The guarantor will be liable to pay if you default on the loan.
• Not all banks offer family guarantees. Make sure you are seeking advice from a mortgage broker to tailor your needs.
• Even though guarantor loans allow you to borrow 100% of the purchase price, many lenders still require you to have 5% of the purchase price in genuine savings.

When can I remove the guarantee?

Ultimately, you do not want the guarantee to be in place for the entire loan term of 30 years. You should apply to the bank to remove the guarantee when the following conditions have been met:

• You can repayments without any assistance.
• Your loan is for less than 90% of the property value (ideally 80% or less).
• You haven’t missed any payments in the last 6 months.

Most people are able to remove the guarantee somewhere between 2 and 5 years after they initially set up the loan.