Is a Guarantor Home Loan Right For Me?
A guarantor home loan could help you qualify and apply for your first home loan but be sure to know all the facts, writes Funding Options managing director Dom Cassisi.
Qualifying and applying for your first loan can be an intimidating process.
Even if it’s not your first loan, you might wish you had some backup to help you secure the loan.
In either case, having a guarantor could be your key to successfully obtaining a loan.
Who is the Guarantor?
A guarantor is someone closely connected to you who can offer additional security towards helping you qualify for the loan. A guarantor is a third party member of the agreement and is most commonly a parent or spouse.
Just to be clear, a guarantor is NOT the same thing as a co-applicant. A guarantor provides some security, but their responsibility can end well before the loan is paid off. The guarantor is not obliged to pay off the loan – that’s your responsibility.
What a Guarantor could mean for you
Your property will furnish the primary security for the loan.
But what if you don’t have enough?
A guarantor allows their own property to count as additional security by letting the lender take out a mortgage over it.
As mentioned earlier, a guarantor will not help you pay off the loan. They simply provide a property to help you qualify for the loan even if you don’t have enough for the deposit.
With a guarantor, you might be able to borrow up to the full purchase price. This could also help you avoid Lenders Mortgage Insurance (LMI).
Before you choose a Guarantor
Keep in mind that someone who agrees to serve as a guarantor will have limited borrowing ability themselves while helping you out.
If you aren’t able to meet the terms of your loan contract, then your guarantor will be liable for whatever they agreed to in their guarantee.
So there is a bit at stake for someone who agrees to be your guarantor. That’s why it’s essential that you and your potential guarantor seek out professional financial advice.
There may even be a fee for releasing your guarantor from the loan, so make sure that you ask about such fees before making an agreement.
Get started with a Guarantor home loan
If you’re looking for a no-deposit option for securing a home loan in Australia, then a guarantor home loan is currently your only option.
This kind of loan opens the door for many individuals to break into the housing market.
A guarantor loan could empower you to change your life. Before you dive straight in, however, contact us and get advice relating to your specific circumstances.
– Dom Cassisi, Managing Director