Acting as a guarantor is a significant financial commitment. While it can help a family member enter the property market sooner, it also carries risk.
Before proceeding, it’s important to understand:
We take the time to ensure both the borrower and guarantor clearly understand the structure and implications before proceeding.
Frequently Asked Questions (FAQ)
Still have questions? Get in touch if you need to know more.
If you’re having a hard time saving for your first home, your family can help you with a cash gift to put towards your deposit
A gifted deposit home loan may not be as simple as going up to a lender with your parent’s cash. Lenders are likely to ask for evidence of where the money has come from. Some lenders will request a ‘gift letter’, which states that the funds have been handed over unconditionally and without expectation of repayment. Even with a gifted deposit, lenders still like to see that you have the discipline to keep up with home loan repayments. To satisfy this you may be asked for evidence of genuine savings, including your past rental history.
Once you’ve paid off the second smaller loan, you can apply to remove the guarantee. This means your guarantor will only be liable for as long as it takes you to pay off the smaller loan. You can even make extra repayments to help release the guarantor’s property sooner. Or you are able to refinance your home loan once you have over 20% equity in your home.
- You can spend less time saving for a deposit or even not need one at all, so you can get on the property ladder sooner
- You can borrow up to 100% of the property’s purchase price plus applicable fees without having to pay Lenders’ Mortgage Insurance (LMI) – which you would normally have to factor into your budget if you were borrowing more than 80% of the property’s purchase price.
