Your family member can support you in the purchase of property by providing additional collateral for the loan
In case the borrower defaults, the lender liquidates the security provided by guarantor and recover the loan amount to make these loans risk-free for the lender. This category loans are generally limited to Spouse or direct family members. With guarantor loans you will be able to borrow between 100% -110% of your property purchase price. Fundamentally, 80% of the loan amount will be secured on property you purchase and rest 20% on your parent’s property. Guarantor home loans are also termed as ‘Family pledge’, ‘Family Support’, ‘Family Guarantee’, ‘Family Equity’ where all these means the same. Agone, people were allowed to acquire 120% with a guarantor home loan where this is no more available. Limited Guarantee is where only partial loan is guaranteed by guarantor. This limited guarantee can be secured either by property or term deposit. It is opted by guarantor to downsize the liability pledged on guarantor’s property.
Guarantee can be removed under these following conditions.
- If you are ready to repay the loan without any assistance.
- If the loan is 80% or less of the property value.
- Excellent Credit history with no defaults in the last 6 months.
- When the borrower owes less than 80% Loan to Value Ratio (LVR) of their property.