While the ideal situation to refinance a guarantor loan is when you remove a guarantor, a few lenders can help refinance a home loan with an existing guarantor.
When can I refinance guarantor home loan?
You might be able to refinance a guarantor mortgage under the following scenarios:
- You bought vacant land with a family guarantee; however, there was no building contract in place and you need to refinance the guarantor home loan after you’ve signed a building contract.
- You do not have ownership of more than one property when applying for guarantor refinance.
- You want to refinance to release equity from your property.
- You can even refinance an investment property if you do not have ownership of any other property.
If the loan to value ratio (LVR) on your existing guarantor home loan is less than 80%, then the better option would be to remove the guarantor.
How to qualify for guarantor refinance?
Lenders will look at how much equity is in the guarantor’s property before the refinance.
Complications can arise if the guarantor already has a loan of their property, so the existing lender must consent to another lender to use them as guarantor.
Furthermore, before you refinance a guarantor loan, lenders will check that:
- You have a perfect repayment history.
- You have a clear credit history.
- The refinance benefits both guarantor and guarantee.
- If your guarantor does not agree to the refinance, then it is not possible.
Why should I refinance a guarantor home loan?
The advantages of refinancing a guarantor home loan are:
- You are getting lower interest rates on your home loan.
- You could get refinance rebates and cash backs.
- You can manage your cash flow better due to reduced interest rates and repayments.
- If you’re releasing equity, then it can be used for renovations, buying another property, etc.
However, there are disadvantages:
- The guarantor could be locked into a longer loan term.
- The guarantor will need to seek legal advice.
- There are costs associated with refinancing a home loan.
- There are risks involved for the guarantor, especially if the borrower defaults on their repayments.
How to refinance a guarantor home loan?
Refinancing a guarantor loan follows a similar refinance process, i.e. getting your documents like home loan statements, building insurance, payslips, etc. ready.
The process should usually takes up to a month.
FAQs about guarantor refinance
Can I refinance and put a different guarantor?
Unfortunately no. It is not possible to replace a guarantor during refinance.
Can I increase or top-up a guarantor home loan?
Yes, you might be able to increase or top-up with an existing home loan with a guarantor.
However, the limited guarantee amount will not increase with the top-up.