Entering the property market with no deposit!
In our last blog, we explored What is Lenders Mortgage Insurance(LMI).In this blog, we'll drill abit deeper on how we can avoid LMI using a Guarantor Loan and how it can help you enter the property market sooner!
What is a Guarantor Loan?
A guarantor is a third party to a home loan, helping you to get a loan by offering additional security support. This is generally limited to a direct family member (parents or sibling) who are willing to offer support in the form of security on you home loan application.
How does is work?
Using the guarantor's property, the bank will put a "limited guarantee" secured against the guarantor's property.
How does it benefit me?
With Guarantor loans it can allow:
Avoid LMI - By having a guarantor offer additional security, the banks will not require you to pay LMI
Borrow 100% plus cost - Using a guarantor, it's possible to borrow 100% of the property plus any associated cost. In some cases, you may even be able to consolidate some minor debt.
No Deposit needed - You don't need a deposit meaning that you can buy now! While no deposit is needed, the lender will still want to see some form of savings.
Enter the market sooner - With the help of guarantors, it may be the difference in buying now or later.
Secure better interest rates - As this is considered to be 80% lending, you will normally qualify for a better interest rate!
Consolidate your debt - In some cases, you'll be able to consolidate a small amount of personal debt
What do I need to know?
Guarantors are at risk for the limited guarantee amount for a short time. Generally the guarantee can be removed within 3 - 5 years and sometimes a lot sooner! It's recommended that the guarantor seeks legal and financial advice to understand their obligation.
It becomes a pain for the guarantor to sell or refinance while the limited guarantee is still active. We strongly recommend against it!
Most lenders don't accept guarantor loans and restriction applies to who they accept as a guarantor.
Getting a guarantor loan approved is no walk in the park! To learn more about guarantor loans and if it's right for you and how we can help you, contact Home Loan Depot here to discuss your options. Or call us on 1300 967 120 or email info@homeloandepot.com.au.
