Many loan brokers are spruiking the ability to use the $20,000 first home buyers construction grant as a deposit to purchase your first home, but did you know there was another option?
This option is called a family guarantee.
One such family guarantee loan allows for a maximum loan amount equal to 110% of the confirmed value of the purchase property. This allows you to fully fund the new property from your loan along with the bank, government and legal fees (up to 10% of the property value).
The catch is the guarantee which requires a family member (ie; parents) to allow the bank to use their property as security.
The other catch is that the total debt between you & your parents must be less than 80% of both their property & your new property’s combined value.
There must be two loans but both are in the name of the borrower.
- Maximum guaranteed component is 30% of total (meaning your parents will only ever be held liable for this component); and
- Minimum non-guaranteed component is 80% of total
An advantage the Family Guarantee is that it will allow you to avoid mortgage insurance which, assuming you borrowed 90% of a $400,000 property could be in-excess of $12,000.
|up to 110% Borrower must demonstrate the ability to service the loan in their own right|
|Loan A||Loan B|
|Up to 80% of the confirmed security value||Up to 30% of the confirmed security value with guarantee|
|Principle & Interest or Interest Only is available||Must be Principle & Interest|
|No Asset Line||No Asset Line|
|Full Doc Only||Full Doc Only|
|Secured by 1st mortgage (borrower’s property)||Secured by 1st mortgage (borrower’s property)|
Secured by guarantor’s property being 1st or 2nd mortgage
By: Steve Pram
M: 0439 735 404 | P: 07 4613 0311
Stephen Pram is an authorised credit representative of Loan Market.