What Is A Family Pledge Loan?
First-time homebuyers have a tougher time obtaining conventional mortgages. Conventional mortgages require three months of payslips, bank statements, and a 20% deposit. Homebuyers who cannot come up with those three basic requirements can apply for other mortgages such as the family pledge loan.
The family pledge loan requires a guarantor. In this case, the guarantor is a parent. Lenders will accept other relatives. However, a parent is the best option. The guarantor brings their property into the fold. It serves as collateral against the new mortgage. Since the lender can collect the property if the new homeowner cannot repay the home loan, lenders experience little loss.
In most cases, new homeowners repay the family pledge loan in its entirety. Plus, the new homeowner reaps several benefits including increased borrowing capacity, borrowing power, and the beginning of building wealth. In addition, the new homeowner receives competitive loan terms and skips paying the lender’s mortgage insurance fee.
When a homebuyer applies with a guarantor, the lender assesses the parent’s current financial status and their property. The property must remain free of debt and in acceptable condition. Since the homebuyer can borrow up to 105% loan to value ratio, the leftover becomes useful for consolidating other debts. You can also use it to start investing in home renovations or upgrades. You might have interest in a car loan too.
Family Pledge Loan Conclusion
A family pledge loan is a great option for the first-time homebuyer. Mortgage House loan specialists can walk you through the requirements and process. Contact our team today.