What is a Family Guarantee Home Loan
Family guarantee home loan, or pledge home loans, are designed for first time buyers to be able to get into the property market more easily.
Family equity home loans use the equity in the property of a family member’s home to secure a mortgage.
Family Guarantee Home Loans are becoming more popular as property prices rise and minimum deposits for traditional loans are harder to reach for first time buyers.
It depends on how much your family member is willing to guarantee to your lender, but a family pledge loan can allow you to borrow up to the full purchase price of your new home. It can also cover costs associated with moving in, such as stamp duty and legal fees.
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Usually if you borrow 80 per cent or more of the purchase price of a property then you will be required to pay Lenders’ Mortgage Insurance expenses, which cover the lender in case of a loss. A pledge loan option will avoid these extra fees.
As well as avoiding these fees, a pledge loan can get you into your new home sooner and maximise the amount you can borrow. Some loans will even let you use the funds to pay for other outstanding debts not associated with purchasing a home.
Your guarantors can be parents, parents-in-law or step parents, but other family members such as siblings or grandparents may be considered as well. They will be the ones to determine how much of the loan they will secure.
No cash will actually exchange hands from your guarantor to your lender – the loan is secured with equity instead.
One option is to use a limited liability guarantor, which means that a fixed portion of your home loan is secured through a pledge loan. This can be helpful for those who do not require a significant proportion of their loan secured.
Alternatively, you can add this feature to a regular home loan.
Loanseeker Home Loans can explain the details of a family guarantee home loan and help you to decide if it is the best option for your situation. Give us a call on 03 9398 4862 for a chat today.