Using a guarantor for your home loan in Penrith

April 20, 2017
Paul Holland

Saving for a first home is not easy, and first home buyers in Penrith may need extra support to get into a home of their own. Call Paul Holland on 02 4789 0808 for tailored advice on having a guarantor or read to learn more.

Unlike many parts of Sydney, the Penrith region is blessed with affordable housing. It’s still possible, for example, to pick up a 2-bedroom unit for under $300,000 though you need to be quick!

Even so, saving the traditional 20% deposit is a big hurdle for some first home buyers, and that’s when having a guarantor can help.

Buy in Penrith with just a small deposit

In most cases a guarantor will be the parents of a first home buyer. In essence, the guarantor stumps up the equity in their own home as additional security for the first home buyer’s loan. Being able to provide this extra security offers valuable benefits for the first home buyer.

To begin with, it means you may be able to buy your first home in Penrith with just a small deposit (subject to income requirements). And, because the guarantor’s home equity takes up the slack from the first home buyer’s deposit, having a guarantor is a way of avoiding lenders mortgage insurance (LMI), a cost that will otherwise apply if the first home buyer’s deposit is less than 20%.

Not all lenders accept a guarantee, and my team of Penrith home loan experts can let you know those Penrith home loans where having a guarantor is an option. In fact, some lenders are now offering home loans in Penrith that cater specifically to first home buyers using a guarantor. Nonetheless, there are downsides that all parties to the loan need to be aware of.

Be aware of the downsides

Offering to be a guarantor is more than a mere formality. If the first home buyer is unable to meet their loan repayments, the guarantor can be asked to take over the loan, something that can be extremely financially challenging for older or retired parents.

In addition, the guarantor may find their ability to take a loan for their own purposes is limited. These drawbacks make it absolutely essential to seek independent professional advice about being a guarantor, indeed some lenders make this a requirement.

On the plus side, the guarantor doesn’t always have to commit to the full value of the loan. A variety of lenders will accept a guarantee set at a fixed percentage, like 20%, of the first home buyer’s loan. In this case the guarantee can still be used in lieu of a cash deposit while allowing the first home buyer to avoid LMI.

Speak to the Penrith home loan experts

The bottom line is that first home buyers in Penrith do have options to get into the property market, even when without a big deposit. Speak to my team of local home loan experts at Mortgage Choice in Penrith  to understand if a guarantor is the right solution for you. Call me, Paul Holland, today on 02 4789 0808 or drop in and see me at our office in Nepean Village shopping centre.

 

Posted in: First home buyers

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