What is a Home Loan with a Guarantor?

Homebuyers who cannot save for a 20% down payment quickly can opt for the home loan with a guarantor. There are two sides to this loan to consider. A first-time homebuyer can become a homeowner with little to no deposit. The guarantor becomes responsible for the outstanding mortgage amount if the applicant fails to pay. Thus the guarantor needs to prepare for their financial responsibilities.

For this loan option to work, the guarantor must own their home. The property acts as security against the applicant’s mortgage. A guarantor home loan is a great deal for a first-time homebuyer. It offers competitive rates and favourable loan terms.

Applying for a home loan with a guarantor increases the homebuyer’s borrowing capacity. Without a guarantor and deposit, the homebuyer may only receive 60% of the appraised property’s value. With a guarantor and without a deposit, the homebuyer can borrow between 100% and 110% of the appraised property’s value.

In addition, the homebuyer does not incur the lender mortgage’s insurance fee. LMI equals an estimated 1.5% of the home loan. On a $400,000 mortgage, that’s a $6,000 fee saved. It’s a good idea to practice fiscal responsibility. 

Down the road, it’s possible to refinance home loan and remove the guarantor. Mortgage House loan specialists have the tools to explore these options when both parties make the request. 

Home Loan with a Guarantor Conclusion

The home loan with a guarantor option helps the first-time homebuyer. Mortgage House explores all options with every applicant. Contact our loan specialists to receive more information.