Effective from 25 May 2020, NAB will not accept parents as guarantors on their home loans or investment loans.

NAB will not be able to do no deposit home loans for first home buyers who want to use their parents on their home loan.

It updated their guarantor lending policy to ensure that it could “meet regulatory requirements and provide customers with a better experience,” during this unprecedented coronavirus pandemic.

What if I have already applied for a NAB guarantor home loan?

The following conditions will apply if you had lodged a guarantor home loan application with NAB before 25 May 2020:

• If your application has not been conditionally approved yet, the previous policy will apply until 30 August 2020.
• If your application is already pre-approved, then it will be accepted under the previous policy criteria for up to 90 days.
• If you have an off the plan or vacant land guarantee purchase, then it can be accepted under the previous policy for up to 12 months from the date of the original application.

For applications lodged on or after 25 May 2020, the guarantor home loans will be assessed under the new guarantor policy.

What types of guarantors can they still accept?

However, NAB will still accept the following guarantee applications:

• Spousal and de-facto guarantees (servicing guarantees if borrower and guarantor are a married couple or in a de-facto relationship)
• Company director guarantees (company borrower and company director can offer personal guarantees)
• Trustee guarantees (trust borrower and trustee can offer personal guarantees)

What is a guarantor home loan?

A guarantor home loan is when a person provides additional security for your home loan.

This is usually used by first home buyers who do not have enough deposit saved to buy their homes.

Usually, the guarantors have to be a close relative of the borrower, and in most cases, it is the borrower’s parents. However, there are lenders who will accept aunts, siblings, etc. as guarantors.

With a guarantor home loan, a first home buyer can save thousands of dollars by avoiding the cost of Lenders Mortgage Insurance (LMI) – which is paid when borrowing over 80% of the property value.

A guarantor loan allows you to borrow up to 105% of the property value without paying LMI.

Read our extensive guide on guarantor home loans for more information.

What if my guarantor does not qualify?

If your guarantor does not qualify because there is not enough equity left in their property or have other issues, then there are other low deposit home loan options available:

• The First Home Loan Deposit Scheme allows first home buyers with a deposit as low as 5% of the property value to get a home loan without paying LMI.
• Lenders also accept gifted funds from your parents as a deposit for your home.
• There are other low deposit home loan options available, however, you might have to pay LMI.
• No deposit home loan options are also available.

Our mortgage brokers are here to help if you need a guarantor home loan, or you need to explore your home loan options.

Call us at 1300 889 743, or fill in our free assessment form today.