Existing mortgage on the guarantor's property

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Ibrahim
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Joined: Tue May 28, 2019 1:00 pm

Existing mortgage on the guarantor's property

Postby Ibrahim » Tue May 28, 2019 1:01 pm

Hi, my dad’s willing to be the guarantor for my first ever home loan. The problem is, he already has a mortgage on the property. I’m trying to find out how much equity do I need in my dad’s property, what the size of the guarantee is? Simply put, I’m trying to figure out how a guarantor home loan works with an existing mortgage?

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Otto Dargan
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Re: Existing mortgage on the guarantor's property

Postby Otto Dargan » Tue May 28, 2019 1:59 pm

Hello Ibrahim. Welcome to the forums.

It’s great that your dad is willing to be the guarantor, you can borrow up to 105% of the property value with a guarantor home loan. An existing mortgage on the guarantor’s property is acceptable to some of our lenders as long as your dad (guarantor) has sufficient equity in their property.

The total debt secured on their property must not exceed 75% - 80% of the property value. The total debt includes their current mortgage as well as the new limited guarantee.

You can use our guarantor loan calculator to work out the size of the limited guarantee and also identify any potential issues getting approved with some lenders.

We specialise in guarantor home loans.

Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form to find out if you qualify for a 105% guarantor home loan.

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

Ibrahim
Posts: 3
Joined: Tue May 28, 2019 1:00 pm

Re: Existing mortgage on the guarantor's property

Postby Ibrahim » Tue May 28, 2019 5:09 pm

I just checked my dad’s home loan statements, the current mortgage balance is $208,545, and similar properties in the area are being sold at around $690,000 to $740,000. I’m looking at borrowing the full amount for a nice suburban townhouse that’s on the market for $668,000. The limited guarantee came at $167,000 which is fine. I’m trying to figure out apart from not needing a deposit what other benefits are there to using a guarantor?

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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: Existing mortgage on the guarantor's property

Postby Otto Dargan » Tue May 28, 2019 5:32 pm

Hi Ibrahim,

Guarantor loans have several benefits to you as a borrower:
  • You don’t need a deposit, allowing you to buy a home now.
  • You save money by not paying Lenders Mortgage Insurance (LMI).
  • Discounted interest rates are available from select lenders.
  • You can consolidate some minor debts such as credit cards, personal loans, car loans etc. when you buy a home.
  • You can limit the size of the guarantee.

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

Ibrahim
Posts: 3
Joined: Tue May 28, 2019 1:00 pm

Re: Existing mortgage on the guarantor's property

Postby Ibrahim » Tue May 28, 2019 6:56 pm

Awesome! My Mum is on the title and she’s on the fence about being a guarantor. What can I do to make her feel at ease? Insurance?

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

Re: Existing mortgage on the guarantor's property

Postby Otto Dargan » Tue May 28, 2019 8:01 pm

Hi Ibrahim,

Although it is not a requirement to qualify for a guarantor home loan, to give you and your parents added protection in the event of default, you may want to consider getting life, total and permanent disability, and/or income protection insurance. Seek advice from a financial adviser to ensure you choose the right insurance product.

There are other protections for guarantors under the 2019 Banking Code of Conduct effective from 1 July:
  • Guarantors will have a cooling-off period after signing the guarantor agreement.
  • Guarantors will be encouraged to seek independent legal advice before signing, as is currently the case.
  • If you, as the guaranteed borrower gets into financial difficulty, or your financial circumstances change, your guarantors will be notified by the bank.
  • The bank will first attempt to recover their investment through the sale of your property, in the event of a shortfall only will the lenders start action against your guarantor’s property.
Ideally, you want to remove the guarantor in two to five years once you’ve paid down the home loan to 80% Loan to Value Ratio (LVR) or the property value has risen without incurring Lenders Mortgage Insurance (LMI). You can apply to remove the guarantor once the LVR is less than 90% of the property value, however, you’ll incur LMI.


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

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


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