Guarantor Loans
Struggling to save for a deposit? Have little or no credit history?
A guarantor loan may be a worthwhile option to explore. Often referred to as family pledge loans, guarantor loans can be used for home loans. The best part? With a guarantor loan, you could borrow over 100% of a property’s purchase price.
For the reasons above, guarantor loans are often popular choices for first-home buyers or young adults, who may not have significant amounts of cash or credit history. In fact, in the last 6 years alone, guarantor loans have increased by 71% across Australia.
The experienced brokers at MortgageWorks are happy to provide you with all the information you need to make an informed decision or find the right lender for you.
What is a guarantor loan?
In short, a guarantor provides additional security for a loan by offering the equity in his or her own property. So who exactly qualifies as a guarantor? Generally speaking, guarantors must be immediate family members or spouses.
What do you need to be eligible for a guarantor loan?
In order to secure a guarantor loan, you must have someone willing to be your guarantor. This person must meet agree to certain terms, including:
- Must be a homeowner themselves
- Must preferably be a close relative – usually a parent, grandparent or siblings
- Must agree to offer part of their home equity to top up your cash deposit
Benefits of taking out a guarantor loan
Having a guarantor to back your loan can be preferable for many home owners. Why?
- You could avoid the Lenders Mortgage Insurance (LMI), potentially saving you thousands of dollars
- You have extra security behind you
- You can secure a home loan with a small deposit, sometimes without a deposit at all
- It can fasttrack you into the property market
The best part? A guarantor loan doesn’t necessarily have higher interest rates. In fact, a guarantor loan can often have the same rate as a regular home loan.
