Do you want to buy your own home but don’t have a deposit?
Simply get a guarantor loan with the help of your parents and avoid the deposit requirement completely.
With your parents using their property as security for your mortgage:
- You won’t need a deposit: You don’t have to put down a single cent as a deposit! Even better than that, you may be able to borrow up to 105% of the property value to cover conveyancing fees, government levies such as stamp duty, and property title transfer fees. That means you won’t need to cover anything in upfront costs. You can use that money you save for your mortgage repayments.
- You can avoid Lenders Mortgage Insurance (LMI): Typically, you need to pay a mortgage insurance premium as extra protection to the lender if you’re borrowing more than 80% of the property value. However, if you have a guarantor for your loan then you don’t need to pay any LMI premium. You can save several thousands of dollars!
- Pay off your other debts: You can even borrow up to 110% of the property value if you want to pay off your minor debts such as personal loans or credit cards.
- Get discounted interest rates: Lenders see borrowers that have a guarantor as low risk because they have your parents’ property as security just in case you’re unable to meet your loan repayments. Because of this, many lenders will offer you significantly discounted interest rates.
- You can limit the guarantee: If your parents agree to become the guarantors for your home loan, then they are agreeing to give up their house if you cannot repay the loan. A limited guarantee feature, on the other hand, will allow your parents to be legally responsible for repaying your loan only up to a certain limit. This means that even if you can’t repay your loan, they won’t lose their house.
What if my parents already have a mortgage?
You can still get a guarantor loan even if your parents have a mortgage on their house but they need to have a sufficient percentage of ownership on the house.
For example, let’s say your parents have a mortgage and they still have to pay off $100,000. To get your home loan approved, you need your parents to provide a $100,000 guarantee.
In order for your parents to provide this guarantee, their home must have a value of $267,000 or more.
Not sure if you’ll qualify for a guarantor loan or how to work out the size of limited guarantee your parents will be eligible to provide?
For a better understanding, check out our guarantor loan calculator.
Who else can be a guarantor for my loan?
Major lenders only accept your parents as guarantors for your home loan. Only some will consider guarantees from immediate family members such as your siblings, grandparents, spouse, partner who is living together or adult children.
If someone other than your parents is your guarantor then you may need to meet additional lending criteria in order to qualify for a home loan.
Most lenders will not accept your friends or colleagues as guarantors.
If you don’t have a deposit, discover if a guarantor loan is the right option for you by calling us on 1300 889 743 or by completing our free assessment form.
We’re experts in no deposit home loan solutions so speak to us and buy your dream home sooner.