How Can a Guarantor Loan Help You?
What Is a Guarantor Loan?
First-time home-buyers often find it tricky to secure a 20% deposit for the purchase. But if you can offer the bank security through a guarantor, you’ll have a bit more borrowing power.
The guarantor can offer cash (like tucked-away savings or term deposit funds) or equity from their home to use as security, and they won’t need to give any funds directly to the borrower.
The person that secures your guarantor loan will be liable for the amount they guarantee if you can’t repay your loan and default on your payments. They won’t, however, be liable to pay your full debt, just the amount they guarantee.
How Can You Benefit from a Guarantor Loan?
The biggest benefit of having a guarantor on your home loan is that it may help you avoid paying Lenders Mortgage Insurance (LMI).
This is a fee you would have to pay to the lender to protect them against financial loss if you are unable to meet your mortgage repayments.
Lenders usually want borrowers to pay LMI on loans if their deposit is less than 20% of the property’s value.
How Can A Finance Hub and Networks Mortgage Broker Help You with a Guarantor Loan?
We Help At Every Stage
At Finance Hub and Networks, we gather information about your needs and suggest lenders and products that match those needs.
We Compare The Market
We compare loans from various lenders to ensure you are getting the best deal.
We Do All The Paperwork
With banks clamping down on applicants with stricter lending rules, you’ll want your application to be perfect. We take care of all the paperwork!
Guarantor Loan FAQs
Who Can Secure My Guarantor Loan?
Lenders generally require your guarantor to be an immediate family member, such as a parent or partner. Some may also allow others such as a sibling or grandparent, or even in some instances, a close friend.
Does a Guarantor Loan Have Any Specific Requirements?
Generally, each bank will have its own guarantor loan requirements, but you can expect them to want your guarantor to have a good credit score, available equity to be used as security and a stable income.
Do I Still Have to Satisfy Lending Requirements?
You still have to do all your homework: calculate all your income and living expenses to make sure you actually can make the loan repayments with some wiggle room for any unexpected expenses.
Regardless of whether you have a guarantor or not, these are still VERY important steps before buying a home.
What Are the Main Risks Associated With a Guarantor Loan?
The main risks associated with a guarantor loan are for the guarantor.
Any potential guarantors should carefully consider the decision to become a guarantor, as it could put their hard-earned savings or potentially their home at risk and delay retirement plans.
It’s a big decision to make, so ensure you’re confident with the borrower’s financial situation and yours to handle applying for a guarantor loan.
Remember: the guarantor is only liable to pay the amount they guarantee if you default on your payments, not the full debt.
Should I Have a Finance Hub and Networks mortgage broker Help With My Bridging Loan?
A guarantor loan can be a great option if you need that last little push to secure your first home loan.
As with any home loan, however, it doesn’t come without risks. So, it pays to speak to a professional Finance Hub and Networks mortgage broker so that you can get advice tailored to your circumstances.
For example, if you use a guarantor to avoid paying LMI rather than just saving up a 20% deposit, the home loan could end up costing you more in the long run since you’ll be paying interest on a larger portion of the property’s value.
There are many things to consider and Finance Hub and Networks mortgage brokers can help you navigate through it all.
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