Help me figure out the size of the limited guarantee

Any general questions you might have in regards to loans and finance.
Kelly K
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Joined: Mon Apr 01, 2019 6:19 pm

Help me figure out the size of the limited guarantee

Postby Kelly K » Tue Apr 02, 2019 2:45 pm

Hi, I’m trying to figure out what the limited guarantee amount on my parent's property will be if they are acting as guarantors. I’m looking at borrowing 100% of the purchase price ($600,000). My parents owe $100,000 on their $840,000 (CBA valuation) home. Help me figure out the size of the limited guarantee.

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Otto Dargan
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Location: Sydney, Australia
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Re: Help me figure out the size of the limited guarantee

Postby Otto Dargan » Tue Apr 02, 2019 5:08 pm

Hello Kelly. Welcome to the forums.

A limited guarantee is a great way to reduce the risks associated with being a guarantor while still being able to receive the full benefits of a guarantor home loan. However, when your guarantor already has a home loan then your lender will take a second mortgage behind their loan. Not every lender will accept this structure.

According to the figures you’ve provided, the size of the limited guarantee secured on your parent’s property will be $150,000.

You can use our Guarantor Loan Calculator to help you work out the size of the limited guarantee as well as highlight any potential issues with your home loan application.
Keep in mind that every bank employs different methods to calculate the size of the limited guarantee, so this figure might vary.

Our mortgage brokers specialise in guarantor home loans.
Give us a call on 1300 889 743 or fill in our free assessment form and one of our guarantor loan specialist will contact you to discuss your situation.

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

Kelly K
Posts: 3
Joined: Mon Apr 01, 2019 6:19 pm

Re: Help me figure out the size of the limited guarantee

Postby Kelly K » Tue Apr 02, 2019 7:41 pm

Yeah, 150k sounds about right. However, I wouldn’t want to keep the guarantee for long. When can I release the limited guarantee?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Help me figure out the size of the limited guarantee

Postby Otto Dargan » Tue Apr 02, 2019 7:59 pm

Hi Kelly,

Generally, the guarantee can be released at the request of the borrower or the guarantor somewhere between 2 and 5 years once the loan has been set up. However, this can vary significantly depending on the arrangement you have in place and the lender you apply with.

You can apply to remove the limited guarantee under the following conditions:

  • You can afford to make the repayments without any assistance.
  • The size of your loan is less than 90%LVR (Loan to Value Ratio). Ideally, it should be 80% or less.
  • You’ve been making regular repayments for the last six months.

You may have to pay Lenders Mortgage Insurance (LMI), if you still owe more than 80% of the property value when you apply to release the guarantee.

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

Kelly K
Posts: 3
Joined: Mon Apr 01, 2019 6:19 pm

Re: Help me figure out the size of the limited guarantee

Postby Kelly K » Wed Apr 03, 2019 5:51 pm

I see. Could you also help me figure out what other costs will be involved when completing the purchase?

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Otto Dargan
Mortgage Specialist
Posts: 7484
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Help me figure out the size of the limited guarantee

Postby Otto Dargan » Wed Apr 03, 2019 6:40 pm

Hi Kelly,

Sure. When completing the purchase of any property, there are certain additional costs associated with the purchase also known as “Funds to Complete”. It can be divided into two main categories, namely government fees and additional fees.

The government fees include:
  • Purchase stamp duty: It’s a tax levied by your state government on all property purchases. This is the largest expense.
  • Mortgage stamp duty: This is a tax levied by the state government based on the size of your mortgage. It has now been abolished in most states.
  • Transfer fee: This is a government fee for registering your name on the title of the property and removing the vendor’s name.
  • Registration fee: This is a government fee for registering your lender’s mortgage on the title of your property.

You can use our purchasing costs calculator to get a good idea of the government fees that will apply.

The additional fees include:
  • Conveyancing costs: You’ll need to hire a conveyancer or solicitor to handle the transfer of the property into your name. This will cost you approximately $800 to $1,500.
  • Inspections/ Reports: You may need a building inspection, pest inspection and a strata report. Ask your conveyancer if you need these reports. They can cost you up to $600 in total.
  • Loan fees: Some lenders charge an application fee, settlement fee or valuation fee. These fees vary between $0 and $900.
  • Lenders Mortgage Insurance (LMI): If you’re borrowing over 80% of the property value then you may pay LMI.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a loan.

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


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