Potential credit bottlenecks that I need to be aware of as a guarantor

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Richard G
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Joined: Mon May 06, 2019 11:54 am

Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Richard G » Mon May 06, 2019 11:56 am

Hi, we want to buy an investment property for our granddaughter to help her gain some independence and a good credit rating. She works as a hairdresser and earns roughly $50,000 a year and lives with us rent free. She has no debt except for her credit cards with a $3,000 limit. She doesn’t have a deposit, but we can guarantee her investment. My wife and I are both self-funded retirees and we own our house outright last valued at $1.2 million. The property I’m interested in is a unit in Sydney about to come on the market for 650k. It already has a tenant paying 700/week. Based on the information I’ve provided what are some potential credit bottlenecks that I need to be aware of?

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Otto Dargan
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Re: Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Otto Dargan » Mon May 06, 2019 12:24 pm

Hello Richard. Welcome to the forums.

First, there are only two or three Australian lenders who will accept a no deposit investment loan supported by a guarantor. We can assist you to buy one investment property, however, buying multiple investment properties is usually not accepted as the guarantor is taking an unnecessarily high risk for no return whereas the borrower is making all the potential profit.

Second, the serviceability looks very tight. Even though you’re acting as the guarantor, she would still need to be able to make regular repayments on her loan without significant hardship. Using the information you’ve provided, by choosing the right lender and amending your loan structure she could borrow up to $687,860. This estimate was arrived at using our borrowing power calculator which uses a similar method to that of lenders, however, we would need to conduct a more detailed analysis to get an accurate figure.

We specialise in guarantor home loans and investment loans.

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

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

Richard G
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Joined: Mon May 06, 2019 11:54 am

Re: Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Richard G » Mon May 06, 2019 1:43 pm

Hmm. If her income is insufficient to meet the serviceability then can’t they use my income for any shortfalls?

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Otto Dargan
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Re: Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Otto Dargan » Mon May 06, 2019 2:05 pm

Hi Richard,

Unfortunately, you can’t use your income to meet any shortfall in the serviceability. The serviceability relies solely on your grand daughter’s income and the estimated rental income from the investment property. The guarantors’ income is not considered for this purpose.

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

Richard G
Posts: 3
Joined: Mon May 06, 2019 11:54 am

Re: Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Richard G » Mon May 06, 2019 3:28 pm

That’s fine and dandy. The last thing I’m trying to work out is the guarantee portion which will be secured on my house. How much will I be guaranteeing here?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: Potential credit bottlenecks that I need to be aware of as a guarantor

Postby Otto Dargan » Mon May 06, 2019 3:54 pm

Hi Richard,

Generally, the limited guarantee is calculated with the help of the amount that you’re looking to borrow and the price of the property.
It’s calculated as: Limited guarantee = (loan amount / 0.8) - property price
Your limited guarantee size is $162,500.

Alternatively, you can also use our guarantor calculator to find out the size of the limited guarantee.

Our mortgage brokers specialise in guarantor home loans.

Give us a call on 1300 889 743 or fill in our free assessment form to discuss your situation with one of our experienced mortgage brokers.

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


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