If you are looking to purchase your first home, or even your second, and wish to use your parents property to help you with the deposit, than a family guarantee loan may be for you.
The current housing climate has left it difficult for many first starters or hopeful property investors to branch out into the market. Moreover, coming out of a difficult financial period, the traditional parental support in the form of offering assistance with home deposits is becoming less and less common. Fortunately, families can still band their resources together in the form of parental guarantee home loans. This allows the bank to utilise a portion of the equity held in your parent’s property as additional security on a home loan.
What is involved with a parental guarantee home loan?
Whether you only have enough savings to pay for the stamp duty and legal costs associated with purchasing a property, or have no savings held at all and need to borrow the full amount of the house, your parents can offer a percentage of the property they own to use as guarantee for the bank. For example, if they own a $500 000 property, and owe $200,000 on it, then they could potentially provide $150 000 as a ‘deposit’. From there, they will need to sign official documents with a bank that allows parental guarantee home loans, and the mortgage will go in your name. Policies and conditions vary between financial institutions, so it’s always important to consult a reliable mortgage broker before moving forward.