Family guarantee home loans have become a popular way for family members to help each other into the property market. If you'd like to own a home, yet don't have a large deposit, then a family guarantor option may be for you.
If you have a family member who owns their home either outright or has equity available, they may be able to use a portion (usually 20-25% of your new homes purchase price) as security towards your home. This can allow you to get a home loan with little to no upfront deposit required.
Because different lenders have different products and requirements when it comes to a family guarantee home loan, we have provided some general information to help you get an idea of how it works.
Let's imagine you have a parent (or family member) who owns their home. Provided they have equity available in their home, they may nominate a portion of this as security towards your home loan.
See the diagram below as an example...
So instead of you only being able to borrow 80% and the need to provide a large deposit, with your parents home as security you may be able to borrow up to 100% of your new homes value.
But why can't Banks just lend 100% without a guarantor?
Because Banks love security! After all, it's their money that they are putting on the line. By having a deposit or another home as security, the Banks feel more confident to lend money to you.
Each lender will provide details on who can be your Guarantor. Generally, family members who can guarantee your home loan may be:
The guarantor is only liable for the portion of your loan that is secured on your home, not their entire property.
If you have a Guarantor and end up in a situation where you cannot make your loan repayments on the due date and there is a need for an enforced sale of your home, the bank may look to your guarantor to pay the guaranteed portion of your loan.
Family guarantors should always seek independent legal and financial advice before committing to a family guarantee agreement. It is important to be aware of all their obligations and pitfalls.
Family guarantee home loans have become a very popular way for family members to come together and support each other to achieve home ownership.
If you and your family member would like to explore a family guarantee home loan option, we can help to determine if a guarantor option makes sense for you and provide you with some options.