Another Option For First Home Buyers

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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.

To summarise:

up to 110% Borrower must demonstrate the ability to service the loan in their own right
BORROWER
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

Email: stephen.pram@loanmarket.com.au

Stephen Pram is an authorised credit representative of Loan Market.

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