Buying investment property with the help of a guarantor

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ottoman
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Buying investment property with the help of a guarantor

Postby ottoman » Sun Oct 04, 2015 6:16 am

Hello. I’m a teacher living and working in Brisbane. My total yearly income is around $65,000 and I know that I can afford it so I want to take out an investment loan to invest in a new house outside the city. The current price for the house is $580,000 but because I paid off my previous home loan with significant extra repayments, I don’t have more than $20,000 in my bank account.

I’d rather keep the 20k for any emergencies so I don’t want to use it as a deposit. I’ve heard that a guarantor can help us buy a house through a family guarantee but can an investment property be purchased with the help of a guarantor? I’m not fully clear of the advantages of having a guarantor so please include it as well. Thanks.

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Otto Dargan
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Re: Buying investment property with the help of a guarantor

Postby Otto Dargan » Sun Oct 04, 2015 9:45 am

Hi ottoman. Welcome to the forums.

If you’re planning on buying an investment property using a guarantor mortgage then you may be delighted to know that it is possible. You may already know that in a guarantor mortgage, the property of the guarantor, who is usually your parents or close relatives, is used as security against the property that you’re buying.

With a guarantor mortgage, you may be able to borrow up to 105% of the property value that you are buying to cover the cost of the house as well as other associated costs such as stamp duty and conveyancing fees. If you want to consolidating minor debts with your home loan, then you may be able to borrow even up to 110% of the property value.

However, please note that your guarantor must have sufficient equity in their property. You may also need to have at least 5% of the purchase price in genuine savings since it is a requirement from some lenders even if you’re borrowing the full amount.

If a guarantor doesn’t seem like the way to go then another way through which you may be able to buy an investment property is through a home equity loan. You mentioned that you paid off a previous home loan so it should be safe to assume that you already own a home. You may be able to use the equity in your home for a new mortgage since you’ve already paid off the mortgage meaning you should have sufficient equity on the home.

Cheers,
Otto
Otto Dargan
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ottoman
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Re: Buying investment property with the help of a guarantor

Postby ottoman » Sun Oct 04, 2015 3:30 pm

Hi Otto,

Thank you for explaining all that to me. I’m not entirely sure if I should go guarantor or take out a home equity loan. Can you tell me a little about home equity loans and what else I can use it for?

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Otto Dargan
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Re: Buying investment property with the help of a guarantor

Postby Otto Dargan » Mon Oct 05, 2015 8:09 am

Hi ottoman,

Home equity loans make it possible for you to take out a home loan using the equity in an existing property that you own. Home equity loans are generally quite flexible in nature and so they have grown quite a bit in popularity. One flexibility that such a mortgage offers is the amount of equity that can be used to borrow. You can use a specific amount you require, and will be paying interest only on how much you’ve borrowed.

You may take out a home equity loan to:
  • Buy real estate, a business or cars and boats.
  • Invest in a business, or in stocks, shares, and funds.
  • Renovate an existing property.
  • Consolidation debts.
  • Tackle holiday, wedding or medical expenses.
  • Use as emergency funds.
Please note that there may be downsides to home equity loans as well. If you’re not prudent in using money, you may lose your entire equity instead. Also, if you’re offered a line of credit then you may have to pay a higher interest rate than that of a standard home loan.

If you want to learn more about using a guarantor loan to buy an investment property or how home equity loans work, you can have a look at our website. You can also speak with one of our specialist mortgage brokers directly by calling us on 1300 889 743 or by filling in our free online assessment form.

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

ottoman
Posts: 5
Joined: Fri Mar 20, 2015 8:56 pm

Re: Buying investment property with the help of a guarantor

Postby ottoman » Mon Oct 05, 2015 6:41 pm

Interesting. Thanks for the prompt response. I do like the sound of a home equity loan but it seems like a guarantor loan could do the same thing but with lesser risk. I’ll take a look at your website and will enquire if I don’t understand anything. Goodbye.

emu
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Joined: Mon Mar 16, 2015 6:41 pm

Re: Buying investment property with the help of a guarantor

Postby emu » Tue Dec 15, 2015 3:44 pm

Hello. I’m considering investing in a property and while checking out a few things in the web, I stumbled upon this thread. I didn’t know that we could use a guarantor loan to buy an investment property. That’s quite good and I may probably follow that plan through but right now, I want to know if any of you guys know where I can get an estimate of the amount of money my investment property may make in a certain time period. Anyone?

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Otto Dargan
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Re: Buying investment property with the help of a guarantor

Postby Otto Dargan » Wed Dec 16, 2015 9:56 am

Hi emu,

You can use the Investment Property Cashflow Calculator to get an estimate of your property’s cashflow.

The cashflow of a property simply signifies the income it generates in opposition to the expenses associated with it. So if your interest, repairs, maintenance, council rates, water rates, insurance and property management fees are more than your rent income then the property has a negative cashflow and you’ll need to put in a bit of your money every week to cover the shortfall.

Using the calculator is a simple and easy process. You’ll only need to enter the details of the investment property that you want to purchase and your income into the calculator. After this, the calculator will work out the rest for you.

You may use the calculator by following these three easy steps:
  • Step 1 - Enter the details of the purchase. This should include the property price as well as your deposit amount.
  • Step 2 - Enter your income and the expected amount of rent income.
  • Step 3 - Enter the costs associated with the property. Please note that some of these costs will be estimated by the calculator automatically.
For more information, you can visit our website or call our office.

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

emu
Posts: 6
Joined: Mon Mar 16, 2015 6:41 pm

Re: Buying investment property with the help of a guarantor

Postby emu » Wed Dec 16, 2015 4:02 pm

Yes, that investment property cashflow calculator was exactly what I was trying to find. I did find a few calculators here and there in the web but none of them seemed to be the least bit reliable. Your calculator was indeed quite easy to use and I also opted to contact one of your mortgage brokers. I’m eagerly waiting for their reply. Thanks, Otto.


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