Guarantor loans are now the only way to borrow 100% of the purchase price since the traditional 100% home loan was removed from the lending market.

With the assistance of a guarantor you can borrow over 100% of the purchase price which will allow you to buy a property and also pay for purchasing costs such as stamp duty.

The different types of guarantees are;

• security guarantee – This type of guarantee the guarantor uses property that they own as additional security for your loan. If the guarantor already has an existing loan on their property then in most cases the bank will take a 2nd mortgage as security. This type of guarantee is generally used when first home buyers are buying a home, have sufficient income but no deposit or minimal savings to put into the
  purchase.
• income guarantee- This type of guarantee the guarantor does not provide property as security but provides their income to be used to assist with the repayments. This type of guarantee is generally used when someone is trying to buy a house in their name but is receiving help from someone who will not own the house to make the repayments. The income guarantee allows the bank/lender to consider people in these circumstances who would otherwise be unable to qualify for a loan. Usually this type of guarantee is only for a small period of time where the borrower is on an initial low income period, such as an apprenticeship/traineeship, student or probation. The Guarantee is taken off, once your income is sufficent to service the loan. The maximum you can borrow is generally 80% of the property value with an income guarantee in place unless there is also a security guarantee (see below). Note that not all banks/lenders will consider the income guarantee, and usually only on a case-by-case basis.
• secuirty & income guarantee – This is a combination of the above two guarantee types. A security and income guarantor is most often a parent helping their child who is a student or who has a low income to buy their first property.
• family guarantee – This is the name given for when the guarantor is directly related to the borrowers. Banks refer to this as a “parental guarantee”. Grandparents, siblings and other family members as guarantors can be considered on a case by case basis.
• limited guarantee – A limited guarantee is where only a portion of the
  loan is guaranteed by the guarantor. This is most often used with security
  guarantors so as to reduce the potential liability secured on the guarantor’s
  property. Guarantees can be either limited or unlimited, depending on both the guarantors wishes and the lenders requirements.

As each Bank and Lending Institution offer their own guarantor supported loans and requirements the common example of a limited ‘security’ guarantee structure is as follows;

80 / 20 Example (plus costs)

Whilst Joe’s parents are providing the limited security guarantee, Joe Blow is responsible for servicing the full loan amount. In the example above, the loan repayment would be based on the full loan amount of $300,000.

If the above type of structure could help you purchase your home sooner than you
thought, please contact Candice today, to discuss further or email candice@harvestinggroup.com.au.