A guarantor could help you own your home sooner
Saving a decent home-buying deposit can be difficult … especially if you're renting. But there is a solution that could get you over the line sooner - having a 'guarantor'.
A guarantor is someone - usually a parent or a family member - who offers their own home as extra security for your loan.The guarantor isn't required to make any payments on your loan. But if you can no longer keep up your repayments, the lender will turn to the guarantor to make the repayments.
So what are the benefits for home buyers?
The big plus for home buyers is the extra security a guarantor provides. It means you may be able to secure a home loan with just a small deposit – or even no deposit at all. It could also mean avoiding Lenders Mortgage Insurance – a saving that can run into thousands of dollars.
The lender will still check you can comfortably manage the loan repayments, but having a guarantor can fast-track you into a place of your own.
What about the guarantors?
Each lender works differently, but in many cases your guarantor can nominate how much of your loan they're prepared to guarantee, and how long they wish to act as guarantor for. Whatever the case, anyone agreeing to act as a guarantor should seek independent legal advice. Some lenders insist on this. That's because when you sign your name as a guarantor, you could become legally responsible for paying back the entire loan if the original borrower can’t keep up the repayments.
There's a lot to weigh up, and it's definitely worth speaking with your local Mortgage Choice broker about using, or becoming, a guarantor. We understand the different requirements of each lender when it comes to having a guarantor, and this help you cut through the clutter to find the loan that's right for your needs.
And, our financial advisers can help your guarantor to check that this is the right move for them, and make sure that all parties involved have the appropriate insurances in place to protect themselves should the unexpected happen. Talk to us today to find out more about how we can help.