Guarantor loans are a type of mortgage where a family member will use the equity they have in their property as additional security against your loan. Guarantor loans are extremely popular with first home buyers who are struggling to save a deposit or are unable to get a loan themselves but they are certainly not limited to this type of lender.
Advantages:
- No deposit required. If your guarantor has enough equity in their property you won’t have to pay a deposit meaning you can borrow 100% of the purchase price
- You won’t have to pay lenders mortgage insurance potentially saving you thousands. With another property put up as additional security, the lender considers your loan of a lower risk and therefore you will not be required to have mortgage insurance
- You can remove the guarantee. Once you have enough equity in your home you can remove the guarantee so your guarantor no longer has any responsibility for your property
Disadvantages:
- The person or persons who go guarantor are liable in the event that you default on your loan and put their property at risk
Download our ‘Which Home Loan’ brochure (pdf) for more tips and general information.
