A Family/Limited Guarantee is a specialised guarantee that allows a family member, typically a parent, to use their own property as additional security for a portion of the borrower’s loan. This type of loan is particularly beneficial for first home buyers or those without a sufficient deposit. By using a family member’s equity, borrowers can avoid paying Lenders Mortgage Insurance (LMI) and secure a home loan with a smaller deposit, making homeownership more accessible.
A Family/Limited Guarantee plays a crucial role in helping individuals and families enter the property market sooner than they might otherwise be able to. With property prices on the rise, saving for a 20% deposit can be challenging, especially for first-time buyers. This loan type offers a solution by reducing the upfront financial burden, allowing buyers to secure their dream home sooner. It’s also an important tool for families who want to help their children or relatives establish themselves in the property market, offering financial backing without the need to provide cash upfront.
By using a guarantor, borrowers can often bypass the need for LMI, saving thousands of dollars.
Borrowers can secure a loan with a smaller deposit, sometimes as little as 5% or even no deposit in some cases.
This loan type allows borrowers to purchase property sooner than if they had to save the full deposit.
With the support of a guarantor, borrowers might have access to more flexible repayment options.
It’s an opportunity for families to support each other in achieving homeownership goals without an immediate financial outlay.
Ideal for first-time buyers, where a family member provides security for part of the loan to help the buyer enter the property market.
This option allows borrowers to avoid Lenders Mortgage Insurance by having a guarantor cover a portion of the loan, typically up to 20%.
Guarantors use the equity in their property to cover the shortfall in the borrower’s deposit. This can be released once the borrower's property increases in value or the portion of the loan has been paid off.
