GUARANTOR LOAN & DEBT CONSOLIDATION

Any general questions you might have in regards to loans and finance.
Post Reply
GWJJTJ006
Posts: 3
Joined: Fri May 28, 2010 11:36 pm

GUARANTOR LOAN & DEBT CONSOLIDATION

Post by GWJJTJ006 »

My husband and I would like to build our next home, however, due to various factors, we do not have a deposit and owe about $7K at present on a credit card. We own our two relatively late model cars and do not have any other debts, and both hold perfect credit ratings. With our previous home loan with the ANZ for 3 years, there was never one late payment.

We would just like to find out if we would qualify for a family guarantor construction & debt consolidation loan (brother as guarantor). My brother is in a very secure financial position and, although he has three properties with mortgages on each, he also has considerable equity in each of these properties. He is willing to take a 2nd mortgage or co-invest.

As we are currently renting, the construction loan we would ideally seek, if possible, is one which allows monthly repayments to be capitalised for the duration of the building process (one of your representatives advised that there was such a product).

My husband's gross income is approx $95K and I receive FTB of $606 (inc. rent assistance) or $456.12 (without rent assistance). We have four children.

Any advice whatsoever, would be appreciated as we are extremely keen to get ourselves back on the 'property ladder'. Also, if you feel that by us waiting to pay off the credit card first would put us in a better position, we would appreciate that advice too. Thanks very much!

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: GUARANTOR LOAN & DEBT CONSOLIDATION

Post by Otto Dargan »

This is quite a complex situation as you have several aspects of your situation that is a possible problem for some lenders:

* No savings
* Unsecured debts to be consolidated (possibly)
* Guarantor who is not your parents
* Construction
* Capitalising payments during construction (are you sure one of our brokers said this? This type of loan is very rare outside of commercial lending)

If your guarantor is not one or both of your parents then generally you will need to prove 5% of the total cost of land and construction as savings. Whenever there are many issues with someone's situation it is very difficult to find an appropriate lender as the lenders that are fine with no savings will not accept your brother as guarantor, and the lenders that are ok with no savings and your brother will not accept construction!

My advice is to consider the following:

* Can your parents be guarantors? This allows us to use many more lenders.
* If possible avoid construction.

If you can do that then we can easily find you a very low cost guarantor mortgage with a major lender.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

GWJJTJ006
Posts: 3
Joined: Fri May 28, 2010 11:36 pm

Re: GUARANTOR LOAN & DEBT CONSOLIDATION

Post by GWJJTJ006 »

Thank you for your reply. Unfortunately, it really is the situation where only my brother would be in a position to go guarantor for us. The reason for construction is that it works out to be relatively cheaper for us to build than to buy a house here in Perth. If this is not an option, however, we will definitely consider buying established.

I do vaguely remember the gentleman's name who gave us the previous advice, but we only had a brief conversation as I was on my way out to take the kids to school, and we were meant to touch base later. I did, however, run this question about consolidation past him, and he did say there were some lenders who would facilitate this sort of set-up. This is not something we definitely require, however, it would prove helpful as we are still renting.

Thanks for your advice, and we hope that you will be able to provide further advice pertaining to our situation.

GWJJTJ006
Posts: 3
Joined: Fri May 28, 2010 11:36 pm

Re: GUARANTOR LOAN & DEBT CONSOLIDATION

Post by GWJJTJ006 »

Hi Otto

Further to our previous enquiry, just wanted to run another scenario before you that being, do you think it would an option for us to buy a block of land first (under the guarantor loan if that is permissable), wait for some equity to grow in this block then use this same equity to work as a deposit to go towards construction? I understand that most lenders won't 'top up' a loan when a guarantor is involved, but we thought that it may be possible for us, if there was sufficient equity, to remove the guarantee element of the loan after 6 months of payments etc. and use the the equity to qualify for the construction element within our own right. We are aware that LMI may apply, but hopefully we can counteract some of that with extra payments to land loan. Any thoughts would be appreciated. Thanks

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: GUARANTOR LOAN & DEBT CONSOLIDATION

Post by Otto Dargan »

Yes it would be possible to buy the land and then later on remove the guarantee and increase the loan for construction. You would need to build enough equity so that you had a minimum of 5% of the total cost of the land and construction in equity. This could come from capital growth or extra repayments. Keep in mind that bank valuers are a little conservative so capital growth may take longer than anticipated, allow a year or two for this to work rather than just 6 months.

Thanks
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Post Reply