Is it possible to borrow 100% construction loan with a guarantor?

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Barry L
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Joined: Wed Mar 06, 2019 2:07 pm

Is it possible to borrow 100% construction loan with a guarantor?

Postby Barry L » Wed Mar 06, 2019 2:08 pm

Hi HLE, We’ve found a great piece of land on a sloping hill where we want to build our home. We want to move forward and make an offer for the land. I make about 90k a year, while my wife brings in about 60k. Our joint savings account has roughly 20k in it with a couple of thousand on our credit cards and no other liabilities. Is it possible to borrow 100% of the cost of the land and construction with a guarantor?

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Otto Dargan
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Re: Is it possible to borrow 100% construction loan with a guarantor?

Postby Otto Dargan » Wed Mar 06, 2019 4:11 pm

Hello Barry. Welcome to the forums.

Guarantor home loans are now the only way to borrow between 100% and 110% of the purchase price of a property. As for your question, yes it is possible to borrow 100% of the total land value and cost of construction with a guarantor loan.

However, be aware that many lenders do not allow ‘loan increases’ on guarantor loans which means if you buy the land and then later apply for the construction loan, it may be declined.

Building a house is a complex process which involves multiple parties such as builders, contractors, lenders, solicitors, accountants, and council.

We have mortgage brokers who specialise in construction loans.

Give us a call on 1300 889 743 or fill in our free assessment form to discuss your situation so we can structure your loan correctly and get it approved.

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

Barry L
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Joined: Wed Mar 06, 2019 2:07 pm

Re: Is it possible to borrow 100% construction loan with a guarantor?

Postby Barry L » Wed Mar 06, 2019 6:50 pm

So, the only way to do it is with a guarantor loan, got it! My dad will be retiring in 4 to 5 years at the earliest, so we’ll probably have to remove the guarantee at that point. When and how can I remove the guarantee?

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Otto Dargan
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Re: Is it possible to borrow 100% construction loan with a guarantor?

Postby Otto Dargan » Wed Mar 06, 2019 7:29 pm

Hi Barry,

You would need to apply to the bank to remove the guarantee when the following conditions have been met:

  • You can afford the repayments without any assistance.
  • Your loan is for less than 90% of the property value (ideally 80% or less)
  • You haven’t missed any payments in the last 6 months.

Generally speaking, most people are able to remove the guarantee somewhere between 2 and 5 years after they initially set up the loan, although this can vary significantly.

If at the time when you need to remove the guarantee you still owe more than 80% of the property value, you can still remove it but you may have to pay Lenders Mortgage Insurance (LMI) to achieve this.

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

Barry L
Posts: 3
Joined: Wed Mar 06, 2019 2:07 pm

Re: Is it possible to borrow 100% construction loan with a guarantor?

Postby Barry L » Thu Mar 07, 2019 11:31 am

What if in 5 years we haven’t paid off the mortgage down to 90% of the property value. Can my parents still sell their house if they are the guarantor?

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Otto Dargan
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Re: Is it possible to borrow 100% construction loan with a guarantor?

Postby Otto Dargan » Thu Mar 07, 2019 12:42 pm

Hi Barry,

If in 5 years, you haven’t paid down your mortgage down to less than 90% of the property value, your parents may be unable to sell the property or borrow on their mortgage (top-up).

90% Loan to Value Ratio (LVR) is the minimum LVR at which you’ll be able to remove the guarantee with most lenders.

The only options available then would be to either come up with your own savings to cover the difference or ask your parents if they can secure the guarantee with a dollar for dollar term deposit.

Speak with one our experienced brokers today by calling 1300 889 743 or fill in our free assessment form to discuss the specifics of your home loan.

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


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