guarantor loans

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arona29
Posts: 1
Joined: Sun Mar 14, 2010 8:59 pm

guarantor loans

Postby arona29 » Sun Mar 14, 2010 9:11 pm

Hi,

My situation stands as such
- I want to buy a property of no more than 300K
- I have genuine savings of 5% of the property value which means I do not have 20% deposit as discussed with my bank - i could probably rustle up 10% deposit but no more
- I am thinking of a guarantor loan which my parents will agree to, but they already have a loan on their PPR and investment property with a combined loan of about 330K - do they have to take out a 2nd mortgage on one of their loans? how would that work?
OR would it be better for them to lend me the 20% deposit (i would like to avoid this as they need the cash flow)

If my bank did not give me the option of a guarantor loan when I spoke to them, does that mean they don't accept them or just that they don't want to advertise them?

With the LMI - for a 300K loan, how much approx would i be looking at from most expensive to least expensive with LMI capitalisation (if i have a 10% deposit) ?
I thought LMI were annual premiums, but if they are only a once off payment, wouldn't it be okay to use this? everyone tells me it is a bad idea - why?

Thanks

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Otto Dargan
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Re: guarantor loans

Postby Otto Dargan » Mon Mar 15, 2010 7:29 am

Yes it looks like you would qualify for either a 90% or 95% without a guarantor OR guarantor loan (up to 100%).

If you go for a guarantor loan then your lender would take a 2nd mortgage behind your parent's existing loans. This is not available from many lenders and can often be complicated when many properties are involved. Many people in our industry do not understand how to setup a 2nd mortgage when there are multiple properties involved, so would prefer to push you towards a 95% loan.

For a 90% loan for $300,000 you are likely to pay $3,000 to $4,000 in LMI. For a 95% loan for $300,000 you are likely to pay $6,000 to $7,000. This can vary depending on the lender and the loan amount. In particular Westpac, ANZ and St George have very expensive LMI. It is a once off fee, not an annual ongoing fee. If you would like to work out your premium then use our free LMI Calculator.

I'd recommend that you call us on 1300 889 743 and speak to one of our brokers. They can then give you specific recommendations based on your full situation.
Otto Dargan
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P | 1300 889 743
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