Many lenders will allow a related third party to provide additional security to help a family member buy their own home - this is know as a guarantor.
A guarantor differs to a co-applicant or co-signer on the loan who will be responsible for the entire loan until such time as it is repaid in full.
A guarantor is linked to a loan by a guarantee, which can be released and the guarantor's responsibility stopped without the loan being repaid in full.
How does it work?
- A guarantor allows the equity in his/her own property to be used as additional security for the borrower's loan.
- Generally limited to immediate family members.
- Can assist homebuyers with insufficient deposit
- Can avoid and/or reduce LMI (Lenders Mortgage Insurance) costs which could save thousands of dollars
- Borrowers must still be able to service loan on their income
Implications for Guarantor's:
- If borrower is unable to pay back loan, guarantor will be liable for the guarantee amount.
- Need to seek independent legal & financial advice before accepting role of guarantor.
- Will reduce the guarantor's ability to borrow funds after they have agreed to act as a guarantor.
Not every lender treat guarantors the same way and options will vary accordingly - so contact Mortgage Choice today.
With 25 lenders on our panel, it's like to talking to 25 bank managers at the one time.
So now is a perfect time to contact us and see how we can help you.
To find out more - contact us at Suite 2, 10-12 High St Wodonga or call 02 6056 4433.