Guarantor Home Loans – What you need to know!

September 1, 2017

With more and more first home buyers recognizing the value in the Perth market and deciding now is a good time to purchase, it is an opportune time to discuss a guarantor home loan.

Many first home buyers would purchase their first home, but a very large number cannot as they do not have a sufficient deposit.

Whilst Better Choice Mortgage Services has access to lenders that will almost lend 100% of the purchase price of the property, a small deposit is still required and the associated buying costs can run into the many thousands.

If the homebuyer does not have the required deposit, then instead of waiting to save the deposit and run the risk of the market “getting away from them”, the 1st home buyer may seek a guarantee from a family member.

Generally, a guarantee would be provided by a close family member, e.g. parents, grandparents or sibling. If any of these family members have a substantial amount of equity within a property, they may be prepared to allow the 1st homebuyer’s bank to take a mortgage over their property to help secure the 1st home buyer’s loan.

That is, the bank will take a mortgage over the property the 1st home buyer purchases, as well as a mortgage over the guarantor’s property. The guarantor (the family member) will provide the bank a limited guarantee.  That is, the guarantee provided by the Guarantor is generally limited to 20% of the purchase price of the 1st homebuyer’s property.

A sobering word of caution, Better Choice Mortgage Services strongly recommends the Guarantor seek independent legal and financial advice. The bank will probably insist on a least independent legal advice


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