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Mum and Dad Guarantors

“So another option for the first time buyers is the guarantor loan and what this ultimately is if they’re struggling to get the deposit or they may have a 10-percent deposit but they’re not keen on paying the mortgage insurance which kicks in after 80%, mom and dad can come in and offer their property as a partial guarantee, so how that works is let’s say you’re buying your house in Frankston for $400,000 and you’ve managed to save yourself a forty thousand dollar deposit, and which is 10% you need another 10% to stay away from mortgage insurance, mom and dad can secure that 10% against theirs and that will remain their liability until the house increases in value or the mortgage is paid down.”

“The guarantor loan is becoming more and more popular now because of the cost of houses young couples are finding it increasingly difficult to go and save that sometimes they have to save $80,000 it’s incredibly hard for them, so mom and dad’s are more commonly kicking in now with a guarantor loan it saves mom and dad having to actually hand over any money, all they are doing is offering up partial security against their house, the children are still borrowing the money just that mom and dad are offering the security for it, we can sometimes take them to the same lender that mom and dad are with or some lenders will take a second charge behind the first lender and they’re happy to do that because it’s only a small portion that they’re securing against the property, mom and dad generally do have to have an income and they have to be able to service that portion of the debt so look if mom and dad don’t have an income and they’re retired the banks are very reluctant to then add an additional debt to mom and dad in their retirement.”

Written by

Stephen Bonfield, the Managing Director, previously worked for one of Australia’s major home loan companies as an independent mortgage broker. Steve used this experience to set up his own mortgage broking company - a company that places customer needs at the forefront.

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