- Home loan type: Guarantor home loan, First Home Buyer
- Customer goal: To use her rent expenses towards the mortgage repayments on her first home.
- Loan amount: $279,000 at 100% loan to value ratio (LVR)
Joanna was a single mother with a 1-year-old child wanting to buy a home.
She grew tired of paying $1,200 per month rent on her apartment, which she figured could instead go towards paying the mortgage on her own house.
She was earning a decent monthly income of $4,243.50.
Her monthly expenses on groceries, utilities, childcare etc. amounted to $1,440 and she had a car loan lease with Macquaire for $977.
Despite working for 7 years, with her new baby, the expenses kept adding up every month. Saving for a large deposit was difficult for Joanna.
She dreamed of raising her child at home they could call their own.
Then, she found out about guarantor home loans and asked her father to be a guarantor.
Joanna ‘s father was more than happy to help her daughter and grandchild with their first home as their guarantor.
He owned his property outright.
She thought things would get better, but things were trickier than they seemed at first.
The huge caveat was that Joanna’s father was a retired pensioner.
Retired guarantors are considered risky by most banks because:
- In the worst-case scenario, if the borrower defaults on the loan and the proceed from the sale of the borrower’s property is not enough to cover the bank’s loan, then lenders may have to force the sale of the guarantor’s property.
- They pose a reputational risk to the banks.
- If the borrower defaults on the repayments, then it will affect the credit score of both the borrower and guarantor.
Her bank declined her loan application as they did not want to risk taking on a retiree as a guarantor.
Joanna was shocked and disappointed!
However, she didn’t give up easily, did her own research and got in touch with us.
Home Loan Experts’ mortgage broker Nirayu Shakya was quick to spot that Joanna was a well-qualified candidate.
- She had a good credit score of over 760 with minimal personal debts.
- She was earning a decent monthly income.
- She has been working in the same job for over 7 years.
Nirayu performed a full credit assessment and serviceability, looking into her income, expenses and liabilities.
With no personal debts, the only major liability that Joanna had apart from her rent was repaying her car loan.
She was also willing to sell the car to increase her deposit and improve her borrowing power, if needed.
There were only a handful of lenders who can accept a retired guarantor.
Nirayu found a lender from our panel, who accepted a retired guarantor.
He presented a strong application highlighting her perfect credit history to prove that she posed minimal risk to the guarantor.
Since Joanna’s father was a retired pensioner, he was required to obtain legal advice prior to signing the loan offer document and put in place a solid exit strategy.
Nirayu also highlighted how the home loan would put Joanna in a better financial position in the long run.
It came as a huge surprise when she received a pre-approval from a lender, just 2 days after her loan application was submitted by our broker.
She got pre-approved for $279,000, and her father provided a limited guarantee of $74,000.
She would be making repayments of $1,273 monthly, which is only slightly more than her existing rent payments.
Besides, as a first home buyer, she was also exempt from stamp duty, saving her $8,097.
A happy ending
With the worry of getting her home loan pre-approved gone, Joanna is busy looking for a perfect home for her and her daughter.
Her father is happier than ever that he could be a special part of his daughter’s life.
Can a retired person be a guarantor?
Just because you’re retired, it’s not the end of the road for you to be a guarantor.
Being a guarantor for your child when they are buying their first home is a fulfilling experience.
Call us on 1300 889 743 or fill in our free assessment form and become a guarantor for your child’s first home.