How Guarantor Home Loans Can Help All Home Buyers

Summary:

Guarantor home loans help buyers achieve their home loan goals sooner by leveraging family support to overcome deposit challenges.

• Use a guarantor’s property equity to reduce or eliminate the need for a deposit.
• Avoid/reduce costly Lenders Mortgage Insurance (LMI) and access better loan terms.
• Ideal for first-home buyers, upgraders, and investors wanting to buy sooner.

Buying a property, whether it’s your first home, your next home, or an investment property, often starts with a big hurdle: saving enough for a deposit. Even buyers with steady incomes can find it challenging to meet lenders’ deposit requirements, which can delay your plans for years.

A guarantor home loan provides a way to overcome this obstacle, giving buyers like yourself a practical solution to enter the property market sooner, upgrade to your next property, or grow your investment portfolio.

What is a Guarantor Home Loan?

A home loan guarantor is typically a family member, usually a parent or close relative, who agrees to guarantee part of your mortgage. This involves using a portion of your guarantor’s own property’s equity as security for your home loan.

This support allows buyers like yourself to:

• Borrow a larger amount than you could on your own
• Avoid or reduce lenders mortgage insurance (LMI)
• Access more competitive interest rates and flexible loan features.

Guarantor home loans give you the flexibility to pursue your home loan goals sooner than you might trying to achieve them on your own.

Who Can Benefit from a Guarantor Home Loan?

Guarantor home loans can benefit a variety of property buyers, such as:

• First Home Buyers: Get into your first home without waiting years to save for a full deposit.
• Purchasing Your Next Home: Purchase your next property while keeping equity free in your current home.
• Investors: Secure an investment property sooner and start building wealth.

By involving a guarantor, you can access better borrowing options, reduce upfront costs, and take advantage of opportunities that might otherwise be out of reach.

5 Benefits of a Guarantor Home Loan:

A guarantor home loan provides several advantages for all types of buyers, such as:

1. Buy Sooner with Less Savings: A guarantor can reduce or eliminate the need for a full deposit, helping you purchase your home or investment faster.
2. Avoid/Reduce Lenders Mortgage Insurance (LMI): With additional security from a guarantor, you may avoid or reduce costly LMI, saving thousands at settlement.
3. Access Better Loan Terms: Lenders often offer more competitive interest rates and flexible features to borrowers supported by a guarantor.
4. Build Your Property Portfolio Faster: Leveraging family support can help you start investing sooner, putting you in a stronger position to build long-term wealth.
5. Access to Top Lenders: With Fox Home Loans, a guarantor loan provides access to our extensive panel of lenders, enabling a loan structure tailored to your unique needs while giving both you and your guarantor confidence and peace of mind.

How Guarantor Home Loans Works and Key Considerations:

As mentioned in the beginning, a guarantor typically provides security for part of your home loan, often the deposit amount. For example, a parent may guarantee the deposit, allowing you as the borrower to avoid or reduce paying LMI. Over time, as equity builds or the loan balance reduces, the guarantor’s responsibility can be removed.

It’s essential that both you and your guarantor fully understand your responsibilities. A guarantor (along with yourself) is legally liable if repayments are missed, and changes in property value could affect the security your guarantor provided.

Careful planning, clear communication, and realistic budgeting are critical to managing these risks. When approached thoughtfully, a guarantor home loan can provide significant opportunities while protecting both parties and supporting long-term property goals.

Moneysmart has an excellent article, “Going Guarantor on a Loan”, where they dive deeper into the risks and understanding the loan contract.

Take the Next Step Toward Your Home Loan Goals:

Call Fox Home Loans, your experienced Sunshine Coast mortgage brokers, and let us help you and your guarantor achieve your property goals today!