Get into the market faster with a Family Security Guarantee
Stamp duty. Legal fees. Moving in. When you’re saving for a deposit on your home, it can be frustrating to see all the extra costs building up. If you’re also trying to save a large enough deposit to avoid paying Lender’s Mortgage Insurance on your home loan, it can be even harder.
That’s where the Family Security Guarantee can help. The Family Security Guarantee allows for a family member to guarantee part of your home loan. The result is that you could get into your home faster, with a little help from your family.
The guarantor could use their home’s equity or Term Deposit to guarantee part of their family member’s loan. There’s no cash to pay and the guarantor chooses the amount they would like to cover, up to 50% of the guaranteed property. To avoid paying Lender’s Mortgage Insurance, you can request to release the guarantee once the required Loan to Value Ratio (LVR) of less than 80% is achieved.
Benefits for the Borrower
Help you reduce or avoid Lender’s Mortgage Insurance, saving you money when you need it most
Maximise the amount you could borrow – up to 100% of the purchase price, plus costs such as Stamp Duty and legal fees.
Benefits for the Guarantor
Nominate a specific amount that your guarantee is limited to, rather than a guarantee for the entire loan amount.
Be released from the guarantee (provided the borrower is not in default, and we would not require Lender’s Mortgage Insurance on the then-outstanding loan balance under our credit criteria) much sooner than would normally occur.
With the Family Security Guarantee, you could borrow up to the full purchase price of your new property. Keep in mind you will need additional funds to cover the costs associated with buying, such as Stamp Duty and legal fees, this of course depends on how much your family member is willing to guarantee, and you must be able to meet the repayments for the amount you wish to borrow.
Lender’s Mortgage Insurance (LMI) is generally payable on loans where the Loan to Value Ratio (LVR) exceeds 80%. With a Family Security Guarantee, you are able to reduce or avoid the added cost of LMI, making the purchase of your home more affordable.
Risks for Guarantors
A guarantor is liable for the amount specified in the Family Security Guarantee, and your ability to borrow may be reduced. If you agree to act as a guarantor, It is a promise to pay the lender the amount you nominate to guarantee. If the borrower does not pay the loan, and you do not have the cash to pay the lender, your house may be sold to cover it.
You will need to read and understand the full terms of the guarantee and seek independent legal advice before signing the documents.
Start the conversation today
Having an open and honest conversation with your potential guarantor (including parents, siblings, sons and daughters) can be a good way to start discussing the risks and benefits of the Family Security Guarantee for both you and your guarantor.
To find out more and see if this could be a suitable option, get in touch with our experts today.