Loan Types
Guarantor Loan
A Guarantor Home Loan is a type of mortgage that allows a family member or close relative to use their own property's equity as security to help the borrower secure a home loan. Essentially, the guarantor provides a guarantee to the lender that they will cover the loan repayments or any default by the borrower. This arrangement enables borrowers to purchase a property with a smaller deposit or without the need for mortgage insurance, as the guarantor's equity acts as additional security for the lender. One of the primary benefits of a Guarantor Home Loan is increased accessibility to home ownership, particularly for first-time buyers or those with limited savings. By leveraging the equity of a guarantor's property, borrowers can avoid the requirement of a significant deposit, making home ownership more attainable. Guarantor Home Loans often offer more favourable interest rates and terms compared to other low-deposit loan options, providing borrowers with greater affordability and flexibility in managing their mortgage repayments.
Features:
Smaller Deposit Requirements: Guarantor Home Loans typically require a smaller deposit or even no deposit at all, as the equity in the guarantor’s property acts as security for the loan.
No Mortgage Insurance: With a Guarantor Home Loan, borrowers can avoid the need for costly lenders mortgage insurance (LMI), which is typically required for loans with a deposit of less than 20%.
Lower Interest Rates: Many lenders offer competitive interest rates on Guarantor Home Loans, as the additional security provided by the guarantor reduces the lender’s risk.
Pros:
Increased Accessibility: Guarantor Home Loans enable borrowers to enter the property market sooner by overcoming the barrier of a large deposit requirement.
Cost Savings: By avoiding the need for mortgage insurance and potentially securing lower interest rates, borrowers can save on upfront and ongoing loan costs.
Flexible Repayment Options: Guarantor Home Loans often offer flexible repayment options, allowing borrowers to tailor their repayments to suit their financial situation and goals.
Cons:
Risk to the Guarantor: Acting as a guarantor carries risks for the individual providing the guarantee, as they are legally responsible for repaying the loan if the borrower defaults.
Impact on the Guarantor’s Property: If the borrower fails to meet their loan obligations, the guarantor’s property may be at risk of repossession or foreclosure by the lender, potentially jeopardizing their financial security.
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Fixed Rate Loan
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This is where the interest rate of a loan is guaranteed to remain the same.
Construction Loan
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May be most suitable if you are building your own home or investment property.
Line Of Credit
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Access to the equity in your home or investment property up to a pre-approved limit.
Split Loan
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Make part of your home loan a variable rate and part a fixed rate, you decide how much you allocate to each.
Guarantor Loans
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A family member uses the equity in their property as additional security against your loan.
Bridging Finance
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Bridging finance allows you to use the equity in your existing home to finance your new one.
FAQ
A Guarantor Home Loan is a type of mortgage that allows a family member or close relative to use their property's equity as security to help the borrower secure a home loan. The guarantor provides a guarantee to the lender that they will cover the loan repayments or any default by the borrower. This arrangement enables borrowers to purchase a property with a smaller deposit or without the need for mortgage insurance.
Typically, a guarantor for a home loan is a family member or close relative who owns their property outright or has substantial equity in their property. Common guarantors include parents, grandparents, siblings, or even spouses. It's essential for the guarantor to fully understand their obligations and risks before agreeing to act as a guarantor.
The primary benefit of a Guarantor Home Loan is increased accessibility to home ownership, particularly for first-time buyers or those with limited savings. By leveraging the equity of a guarantor's property, borrowers can avoid the requirement of a significant deposit or mortgage insurance, making home ownership more attainable.
Acting as a guarantor carries risks, as the guarantor becomes legally responsible for repaying the loan if the borrower defaults. This means that if the borrower is unable to make their loan repayments, the guarantor may be required to cover the repayments or potentially face legal action from the lender. It's crucial for guarantors to fully understand their obligations and seek independent legal and financial advice before agreeing to act as a guarantor.
Yes, if the borrower fails to meet their loan obligations and defaults on the loan, the guarantor's property, which is used as security for the loan, may be at risk of repossession or foreclosure by the lender. This highlights the importance of careful consideration and understanding of the risks involved before agreeing to act as a guarantor for a home loan.