Understanding family guarantee home loans
From skyrocketing property prices to the rising cost of living, purchasing a property grows more out of reach for Australians day by day. Reaching that 20% deposit mark can take several years to hit, locking prospective buyers out of the property market.
A family guarantee home loan or family pledge loan allows borrowers to take out a home loan without a 20% deposit but with the support of a guarantor instead. This guarantor could be a direct family member. A guarantor provides a lender more security by agreeing to cover the cost of the repayments should you ever default on the loan.
How does a family guarantee home loan work?
Family pledge loans work like any other home loan, except the guarantor uses the equity in their property as security against a portion of the loan. The amount secured depends on the guarantor and can be between 5% and 100% of the loan amount.
Once approved for the loan, you begin making your repayments as normal. However, if you default on your repayments, the guarantor becomes liable, and the lender may go after their property to recover the costs. There’s a lot to consider with a family guarantee home loan, which is why it’s highly recommended to work with a financial expert who deals with these loans regularly.
When to consider a family guarantee home loan
If you are itching to break into the property market, a family pledge loan can help fast-track your way to property ownership. You might consider applying for a family pledge loan if you want to purchase a property fast or are struggling to reach a 20% deposit.
A family guarantee home loan is also beneficial to borrowers in a stable financial position and will have no trouble meeting their repayments.
What you need to take out a family guarantee home loan
Family pledge loans vary between lenders, as they each have their own application process. However, some common details you and the guarantor may be asked to provide include:
- Personal identification
- Previous bank statements
- Any liabilities, such as credit card debt
Capta Financial — trusted mortgage brokers in Australia
Between comparing interest rates and sifting through each lender’s approval process, navigating the home loan market can be overwhelming. But with Capta Financial, finding the right home loan is a breeze. Capta Financial can source the best mortgage solution based on your requirements and borrowing capacity.
We’ve partnered with some of the top Australian lenders to offer an extensive product suite to our clients, ensuring they receive a mortgage that aligns with their needs. Find out how we can help secure a competitive deal for you by contacting us today.