For many first-home buyers, saving a deposit is the biggest barrier to entering the property market. With rising prices, reaching a 20% deposit can take years. A guarantor home loan could be the solution, allowing your family to use the equity in their home to help you purchase soonerâwithout needing to hand over cash.
What is a Guarantor Home Loan?
A guarantor home loan is a type of mortgage where a family memberâusually a parentâoffers part of the equity in their own property as additional security for your loan. This can reduce or remove the need for a large deposit and help you avoid paying Lenders Mortgage Insurance (LMI).
How Do Guarantor Loans Work?
Your guarantor uses a portion of their home equity as loan security.
This gives lenders confidence to approve up to 100% of the purchase price (sometimes even extra for costs like stamp duty).
Once your loan balance decreases or your property gains equity, the guarantor can be released.
Benefits of Using a Guarantor Loan
Enter the market faster â Stop waiting years to save a deposit.
Avoid costly LMI â Potentially saving you thousands.
Boost borrowing capacity â A guarantor can help you qualify for a larger loan amount.
Important Considerations
While guarantor home loans have advantages, they also carry responsibility:
Your guarantor is legally responsible if repayments arenât met.
Both parties should seek independent legal and financial advice.
An exit strategy is essential so the guarantor isnât tied to the loan long-term.
Is a Guarantor Loan Right for You?
If you have the income to make repayments but donât have enough savings for a deposit, a guarantor loan could help you achieve homeownership sooner. A mortgage broker in Mackay like Justin Shoer, Nikita Denkewitz and Golda Emery can guide you through the process, explain the risks, and find lenders with the most competitive guarantor loan options.
