How to approach parents as guarantors

Often the process of gathering a deposit or being credit-worthy of a first buyer home loan can prove quite difficult. Whether an old missed bill payment has haunted your credit report or you are unable to get enough of a deposit to avoid lenders mortgage insurance, there are many impediments to that first property purchase in this day and age.

But, as many people have done in the past, it is possible to still obtain a home loan – with a little help from your parents as guarantors.

Getting a guarantor you trust

Getting someone to help shoulder responsibility for your home loan, getting a guarantor, doesn’t necessarily mean having mum and dad come on board. But in many cases, it’s the easiest way. Your guarantor has to be able to trust you, and like wise you have to trust them. They are fronting up the equity in their own real estate to make up the shortfall on your home loan application, so make sure you and your parents understand exactly how it works going ahead.

Both parties must be confident in the other’s ability to maintain repayments!

Benefits of having a guarantor

If you have someone shouldering the load on your loan, it may be possible for you to borrow the full amount of a property’s price – even some associated costs! Avoiding mortgage insurance also means you will pay less in the long term.

Having a guarantor on your home loan is a team effort – if one half fails, the other is responsible. This is why you need to have a long talk with your parents about how payments will work, where financing for repayments will come from, and what will happen if you cannot hold up your end of the deal.

One great way of sorting through this is by contacting a mortgage broker who can work you both through the finer details.