Are you considering borrowing between 100% and 105% of the purchase price of a property? This is considered a guarantor loan. A benefit of this type of loan is that you don’t’ need to save a deposit, along with avoiding lenders mortgage insurance.
How do guarantor loans work?
Generally speaking, parents assisting their children when buying a home often implement this loan structure. They act as the guarantor for your home loan. This structure is a great way to get into the market sooner and once part of the loan has been paid off, or the property has increased in value, then you can apply to remove the guarantee.
Benefits of a guarantor loan?
- The most obvious one is, no deposit is required!
- Receive discounted interest rates
- Save money with no LMI premium
- Consolidate minor debts
- Limit the size of the guarantee
What is my borrowing capacity?
Depending on whether you’re refinancing, a first home buyer, in construction, an investor or debt consolidation the guarantor loan will vary. Generally, it is between 100% and 110% of the loan value that can be borrowed. Lenders usually will only allow first home buyers to set up a guarantor loan, however we know the ins and outs of different lenders therefore if you’re a divorcee or have had an illness forcing you to sell, and are looking to buy, speak to our team.
What is the maximum I can borrow?
The maximum you can borrow is usually 105%, yet if you have debts to consolidate you can go up to 110%. In the past, lenders allowed up to 120% with a guarantor loan, however this is no longer available.
Often, many lenders require that you hold at least 5% of the purchase price in savings then others do not have a specific policy in regards to this.
What about an investment property?
One investment property will be accepted by only two or three lenders in Australia supported by a guarantor. Buying multiple investments is not generally accepted due to creating unnecessary risk. If the guarantor is in a strong financial position, then multiple investments could be an option.
If you’re looking at setting up a guarantor loan in Queensland or throughout Australia contact Hunter Galloway today on 1300 088 065 or send us an enquiry here.