What most banks think
Struggling to save up for a deposit in today’s property market?
You’re just one of many young Australians in the same boat and you too have probably thought about asking someone to act as guarantor on your mortgage.
Banks are very specific about who they’ll accept as guarantors but there are ways to get around this requirement with some lenders.
Who is an acceptable guarantor?
Most banks will only allow parental guarantees i.e a guarantee from the borrower’s parents.
Some lenders can consider guarantees from immediate family members such as siblings, grandparents, spouses, de facto partners or adult children. Friends, workmates or associates aren’t normally accepted because the banks want to make sure that the guarantor has a strong relationship with you.
If someone other than your parents is your guarantor, there are some specialist lenders that can help but you pay a premium to get approved.
Please call us on 1300 889 743 or complete our free assessment form to discover how we can help you qualify for a guarantor loan.
What is the eligibility requirement to be a guarantor?
They must be at least 18 years of age.
Guarantor property must be in Australia
Banks won’t accept a property located overseas as security for your home loan.
They need to be an Australian or New Zealand citizen, however, some lenders will accept guarantors that are living and working overseas.
It’s not uncommon for people later in life to move overseas and keep their home in Australia as an investment property.
Please complete our free assessment form to speak with one of our mortgage brokers.
Your guarantor needs to be of sound mind and will need to seek both legal and financial before making the decision to act as a mortgage guarantor.
The guarantor needs to either own their property outright or owe less than 80% of the property value on their mortgage.
There’s no hard and fast rule with this just be aware that the less equity you have to work, the harder it will be to borrow 100% of the property plus costs, avoid having to pay a deposit and avoid genuine savings.
Must currently be working
Most Australian banks will not accept a security guarantee from a retired or elderly guarantor.
Not all lenders are the same!
Your guarantor can be a self-funded retiree or even on the pension (if they’re over 65 years of age) as long as they obtain legal advice prior to signing the loan offer.
They also need to present a solid exit strategy to the lender.
What if your guarantor doesn’t qualify?
In some cases, your mum and dad won’t be able to act as guarantors on your mortgage because they don’t have enough equity in their property or they’re close to retirement.
Other times, parents may simply not be comfortable in going as guarantor. It’s nothing personal (probably) but don’t worry!
The third option is to buy a property with a friend. This is where you both go together on the mortgage under a co-borrower or co-ownership investment loan.
In this way, you split the deposit and genuine savings requirement in half, get into the property market sooner and you can both reap the rewards of property ownership.
Want to know more about guarantor loans?
Check out the guarantor loan page for more information.