Can my parents be guarantors, even if their property is in New Zealand?

Any general questions you might have in regards to loans and finance.
Blanche
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Joined: Fri Oct 25, 2019 11:02 am

Can my parents be guarantors, even if their property is in New Zealand?

Postby Blanche » Fri Oct 25, 2019 11:37 am

Hi there. We are hoping to buy a home next year and are saving $1500 every month. For now, we have saved $10,000. We have good credit scores and our combined income is $170,000. We are going for a newly established home to take advantage of the First Home Owners Grant (FHOG) as well. The caveat here is that my parents own their $1.5 million property outright and want to help us as well. Can my parents be guarantors, even if their property is in New Zealand?

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Otto Dargan
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Re: Can my parents be guarantors, even if their property is in New Zealand?

Postby Otto Dargan » Fri Oct 25, 2019 12:30 pm

Hello Blanche. Welcome to the forums.

No, unfortunately, the guarantor’s property must be located in Australia. Banks and lenders will not accept properties located outside of Australia as security.

However, there are other ways your parents can help besides being a guarantor.

One option is for them to give you a gifted deposit, that can be used towards a deposit for your home loan. With a gifted deposit, you might be able to borrow up to 95% of the property value. Please note that borrowing above 80% would mean that you’d be paying Lenders Mortgage Insurance as well. They can do this by releasing equity from their NZ property to gift you. To be clear, this will involve two separate loans.

The other way your parents can help is through a parent assist home loan (this is only offered through some lenders). Besides providing you with the deposit, you will have to pay back your parents with a small interest amount as low as 1%. You and your parents will need to get independent legal and financial advice before agreeing to the parent assist home loan.

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

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

Blanche
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Joined: Fri Oct 25, 2019 11:02 am

Re: Can my parents be guarantors, even if their property is in New Zealand?

Postby Blanche » Fri Oct 25, 2019 1:34 pm

Thanks. I did not know that my parents’ property had to be located in Australia to be a guarantor. Can I still get a home loan even without help from my parents? I don’t think they’re in a position to gift me a deposit and the parent assist home loan would mean that we have to manage two loans (if we get a home loan)

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Otto Dargan
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Re: Can my parents be guarantors, even if their property is in New Zealand?

Postby Otto Dargan » Fri Oct 25, 2019 2:09 pm

Hi Blanche,

Yes, you can still get a home loan approved even with little to no deposit, but you will have to pay Lenders Mortgage Insurance (LMI).

There are lenders who will accept at least a 5% deposit to get approved for a home loan, but very strict lending criteria apply since you’re essentially borrowing 95% of the property value. Besides having a stable income and employment, both of you must have a clean credit history, good asset position and the postcode of the property must be accepted by most lenders.

Also, as you are applying next year, you might be eligible for the First Home Loan Deposit Scheme, which lets you purchase a property with a deposit as low as 5% without paying LMI. Couples earning up to $200,000 are eligible and you can even use the FHOG as part of the deposit as well.

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

Blanche
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Joined: Fri Oct 25, 2019 11:02 am

Re: Can my parents be guarantors, even if their property is in New Zealand?

Postby Blanche » Fri Oct 25, 2019 2:36 pm

Thanks for the information regarding the First Home Loan Deposit Scheme, but since there’s no guarantee that we would get it, I think saving up, for the time being, is the best option. How much do I need to save to avoid paying LMI?

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Otto Dargan
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Re: Can my parents be guarantors, even if their property is in New Zealand?

Postby Otto Dargan » Fri Oct 25, 2019 2:47 pm

Hi Blanche,

You would need to save at least 20% of the property value to avoid paying LMI.

For instance, if there is a property valued at $500,000, you will need to save a deposit of $100,000 to avoid paying LMI. Essentially, you would only be borrowing 80% of the property value - and this is seen as less risky by lenders.

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

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


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