For home buyers struggling to break into the market, guarantor home loans can be a great option for reaching that first rung on the property ladder.
Before you get started on this journey, however, it’s important for you to have a precise knowledge of your current and future financial situation.
For most home buyers nowadays (particularly in major cities), the large deposit amount required is the biggest stumbling block. Before you reach out to your guarantor for help with your deposit amount, get an idea of the property price range you’ll be buying in, and what your deposit will need to be.
Generally, a 20% deposit is required to avoid paying Lender’s Mortgage Insurance. Once you know this deposit figure, you can compare it against your deposit savings to know how much your guarantor will be committing to.
With your property price range in mind, you can then go ahead and calculate what your ongoing repayments will be, once your loan is approved. Knowing this figure now is vital – If you are asking your guarantor to help with securing your loan, your guarantor’s property may be at risk if you begin to default on your repayments.
Make sure you don’t get in over your head early, and avoid disappointment later.
Once you have a clearer picture of the financial situation, you should have a chat with your potential guarantor. Most buyers who opt for a guarantor loan reach out to parents or family.
It’s important that both parties understand the pros and cons of guarantor (or family pledge) loans.
Just as it helps your guarantor’s peace of mind to know your financial situation is secure, as the buyer, you should make yourself aware of the financial situation of your guarantor. Transparency is key if this relationship is to work.
The closer you are to your guarantor, the more likely they are to help you with your loan, but in the event that the guarantor relationship breaks down, make sure you’re both able to work together so that both parties are protected.
Once you and your guarantor have agreed to terms, make sure you run the situation past your legal or financial professional so that both parties fully understand the deal.
When you and your guarantor are at a stage where you’re ready to apply, make sure you speak to an expert lender.
At Greater Bank, we’re renowned for our responsible lending practices, and with your best interests at heart, we’ll walk you through your options when it comes to guarantor or family pledge loans.
With competitive interest rates, and a range of simple, helpful loan products to choose from, a Greater Bank lender will be with you every step of the way