How To Borrow 100% With A Family Guarantor - Pearl Financial

How To Borrow 100% With A Family Guarantor

By Shane | First Home Buyer

Feb 07

A family guarantor can help you if you’re not able to save up a deposit or wish to avoid paying Lender’s Mortgage Insurance (LMI). A guarantor is someone who assumes the responsibility of the paying off the loan if you’re no longer able to meet their financial commitment. Mostly, parents assist as their children in buying their own home as a family guarantor.

 

The guarantor basically takes financial responsibility for servicing the home loan in the event that you failed to settle your repayments. Using a family guarantor lowers your risk as a borrower. It also allows your bank to lend you as much as 100% for the purchase price of the property.

 

A family guarantor is one of the last ways you can buy a home with no deposit or Lenders Mortgage Insurance (LMI) charges. So how can you use a 100% home loan to buy a home with no deposit? There are some lenders, prior to the global financial crisis, who would allow consumers to borrow 100% to 120% of the value of the property they were looking to purchase and often with no proof of savings and without a deposit. Unfortunately, lending restrictions became tightened and no-deposit home loans largely went by the way with the occurrence of global financial crisis.

 

However, even though that’s the case, there are still low deposit home loans. These low deposit home loans allow you to borrow with a deposit of as little as 5%. But for those who are struggling to save for a home deposit, there is still one avenue accessible. There are many lenders who continuously offer 100% home loans if a guarantor provides their property as a security.

 

Obtaining a 100% home loan or no deposit is no longer possible unless you can offer the lender an additional financial security. First home buyers are mostly the ones who are in need of borrowing 100% of the purchase price but don’t own another property to offer as an additional security. They obviously can’t borrow if that’s the case, unless they have some support. The good news is that regardless of whether you are a first home buyer or you have owned a property before, it may be possible for you to borrow even up to 110% of the purchase price of a property if you have a family guarantor, which can be a spouse or a family member who is happy to be you assist you.

 

From the borrower’s perspective, having not to pay mortgage insurance or mortgage risk fee can potentially save you thousands of dollars. You may also be able to borrow the purchase costs such as stamp duty, solicitor fees and bank fees, which means that it’s possible for you to purchase without any savings. Plus, guarantor home loans are often easier to qualify for than a 90% to 95% loan. The main reason for that is a mortgage insurer doesn’t have to approve your loan so you are only subject to the bank’s policies.

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About the Author

Shane specialises in helping Gen Y professionals and business owners make an impact by accumulating more assets, generating more income, and having more time to enjoy life. He has a Master of Applied Finance, an MBA, and a Master of Financial Planning. He is also a terrible golfer.

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