A Family Guarantee loan is a way for immediate family members, like parents, to help you purchase a home without them actually providing the cash for a deposit.
Your family members can use the equity in their own home to provide additional security for part of your loan amount. This solution reduces your loan to value ratio (LVR). The LVR is the loan amount divided by the value of your property. By using the equity in your family member's home and reducing the LVR to 80%, you could save a significant amount of money by avoiding the need to pay Lender's Mortgage Insurance. So you get into your home faster, with help from your family.
What are the key features?
By increasing your security through a guarantee from your family, you will reduce the loan value ratio of your loan to 80% or less and avoid paying Lender's Mortgage Insurance.
You can consolidate minor debts into the loan amount, if they are less than 5% of the purchase price.
The guarantee will be released once the limited amount of the guarantee is paid in full or (subject to approval) when the standard LVR requirements are achieved. The guarantor or borrower may request a revaluation at any time to confirm the LVR, subject to the payment of the valuation fee.
Standard guarantee and legal fees will apply. This includes land titles registration fees and the cost of obtaining Independent Legal Advice.
The guarantor can be a new or existing Home Loan customer of the same lender where you are apply for your home loan or even retain their home loan with their existing home loan provider in some circumstances
Am I eligible?
Family members who can provide the Family Guarantee include parents, siblings, sons and daughters.
You can use a Family Guarantee to buy a home or invest in residential property, and you don't have to be a first home buyer to be eligible.
Individual applicants are usually restricted to a maximum of one parental guarantee/family guarantee borrowing.
Disclaimer
This information is current as at 05/05/17. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.
