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.