Guarantor Home Loans
To many parents around Australia the words Guarantor Home Loan sends shivers down their spin. In
the past a Guarantor loan meant losing your house if the person you are guaranteeing does not pay their home loans. In today’s market things have changed and loosing the house if your kids don’t pay their home loan is unusual to say the least. There are many different types of Guarantor Loan on the market now.
Limited Guarantee Home Loan
There are 2 types of Guarantor Loans on the market at present. They are:-
Security Guarantor Home Loan
In this situation the Guarantor is in fact guaranteeing only 20% of the value of the house. Often clients use this type of loan to negate Lender Mortgage Insurance as the client has 20% equity of the property.
Serviceability Guarantor Home Loan
As the name implies this loan is for a customer who does not have the income to support the proposed home loan. Most clients who apply for this type of loan have a situation where their income is temporarily less than what is required to service the loan. For example, a student completing studies and will go into full time employment in a reasonable time.
The intention with both these types of loans is for the customer to build 20% equity in the property as quickly as they can and then release the Guarantee without incurring Lenders Mortgage Insurance.
In the past applicants for these types of loans have taken 24 months plus to build enough equity to release the guarantee.
It is also recommended that the applicants apply for income protection insurance to ensure the guarantor’s interests are protected.
