Monday 2nd December 2019
With house prices continuing to rise rapidly every year, it gets harder and harder to build up the deposit required for a home loan. One way of bypassing this is to apply for a family guarantee home loan or family pledge home loan. Family guarantee home loans are home loans that are secured against a family member’s house. There are many benefits to using a family guarantee but also a few potential problems but it’s an option worth considering if you don’t have the deposit.
Less of a deposit
Most home loans will require a 20% deposit upfront before you can be approved for the loan. With another house as security, you’ll be able to borrow more and won’t need to pay as large of a deposit as you normally would.
Don’t need to pay LMI
If you borrow more than 80% of the LVR then you would usually need to pay for lender’s mortgage insurance but with a family guarantee, this can be avoided. The family guarantee will increase your borrowing power and sometimes you can borrow 100% of the total property value and costs without LMI.
Putting Your Family’s Home at Risk
Putting up a family member’s home as security is always going to be a massive risk for you and your family. If you are considering a family guarantee home loan, you must consider all your options carefully by speaking to a mortgage broker.
Not Every Bank Offers Family Guarantees
Not every lender will offer you a family guarantee home loan which limits your options when considering one. This is another reason to talk to a mortgage broker so you’re aware of which lenders offer family guarantees for the best deals.
A family guarantee home loan is an option worth considering if you don’t have the deposit, but it is also an option that should be carefully considered due to the risk.
If you would like to learn more about family guarantee home loans, then please get in touch with us today.