Family Guarantees

We have helped hundreds of home buyers get into the property market and know how hard it can be to save your initial deposit. A family guarantee can help you get into the market property sooner, by utilising the equity in your parents’ property to make up the shortfall in your savings, and help you avoid paying LMI. We will advise you which lender is right for you, as well as your parents, and make the process as easy as possible for the entire family.

Helping you Buy your First Home or Investment Property

How do I know if a family guarantee is right for me?

A family guarantee is most appropriate where

  • You are a relatively high income earner and / or the property is modestly priced
  • Your savings are less than a 20% deposit plus stamp duty and transaction costs
  • Your parents are financially independent, and if possible not reliant on government welfare
  • They have a home or investment property with no debt or relatively low debt outstanding
Who can provide a family guarantee?

Eligible guarantors are typically parents, but may also include: Adult child; Former Spouse; Grandparent; Guardian or Sibling.

Do my parents need to be working?

Some lenders require your parents to be working, or alternatively self-funded retirees to provide a family guarantee. Other lenders do not, and only require there to be sufficient equity in the guarantor property.

Is the borrowing capacity of my parents assessed?

Some lenders require your parents to demonstrate they can service the guaranteed portion of the loan (i.e. the portion above 80% LVR). Other lenders do not, and only test there is enough equity in the guarantor property.

Who is responsible for repaying a family guarantee loan?

You, as the borrower, are responsible for making the repayments on a loan supported by a family guarantee. That is, you are responsible for the whole amount borrowed under a family guarantee.

What are my parents responsible for if something goes wrong?

Under a family guarantee, the guarantors only provide a ‘limited guarantee’. This means if something goes wrong they are responsible for making sure the loan is paid back. However, if the property is sold, and the proceeds of sale are insufficient to cover the loan, the guarantors are only responsible for paying back the portion of the loan originally above 80% LVR.

Are there any extra costs for a family guarantee loan?

Yes, some lenders may charge for the extra paperwork associated with documenting a family guarantee, plus the additional valuation on the guarantor property. There are also charges for registering a mortgage on your parents property and refinancing it where required. If independent legal advice is required, this is another additional cost.

Can I discharge the guarantee at a later date?

Yes, you may think of a family guarantee as a temporary measure to purchase a property when you do not have a 20% deposit, and you would like to avoid LMI. You will be able to discharge the family guarantee, and release your parents’ property when the loan is paid down, or the value of your property rises, such that the LVR is 80%.

WHO TO TALK TO

Need professional advice on Family Guarantees?
These are experts to get in touch with.

Tommy Lim
Managing Director
Priscilla Tan
Operations Manager
Luke Xie
Finance Broker