USE THE FIRST HOME OWNERS GRANT AS DEPOSIT

Using a Guarantor: Another Path to Your First Home

At BrokerCo, we know that buying your first home can be daunting, especially when saving for a substantial deposit. While first home owner grants are helpful, they may not suit your needs. A guarantor may offer another solution for you as a first home buyer. 

What is a Guarantor?

A guarantor is someone who agrees to support your home loan application by committing to cover the loan repayments if you are unable to do so. This individual is typically a close family member, such as a parent or sibling, who has sufficient equity in their own property. By providing a guarantee, they can help you overcome the hurdle of a large deposit and improve your chances of loan approval.

How Does a Guarantor Home Loan Work?

When you choose to have a guarantor, they use the equity in their own property as additional security for your loan. This can reduce or eliminate the need for Lenders Mortgage Insurance (LMI), which is often required when your deposit is less than 20% of the property’s value. This is an overview of the process of using a guarantor:

1. Loan Application: You apply for a home loan with BrokerCo and indicate that you have a guarantor.
2. Assessment: We assess both your financial situation and your guarantor’s property to ensure it meets our criteria.
3. Approval: If both you and your guarantor meet the necessary requirements, we proceed with the loan approval.
4. Guarantee Agreement: Your guarantor signs a guarantee agreement, outlining their obligations and the portion of the loan they are guaranteeing.
5. Loan Settlement: Once everything is in place, your loan is settled, and you can move into your new home.

Benefits of a Guarantor Home Loan

• Reduced Deposit Requirements: With a guarantor, you may not need to save as large a deposit.
• Avoid LMI: Lower or eliminate the cost of Lenders Mortgage Insurance.
• Get into the Market Sooner: Purchase your home sooner without waiting years to save a larger deposit.
• Increased Borrowing Power: Potentially borrow a larger amount with the added security of a guarantor.

Things to Consider

• Legal Advice: It’s recommended that both you and your guarantor seek independent legal advice before entering into a guarantee agreement.
• Financial Advice: Consider speaking with a financial advisor to understand the long-term implications for both parties.
• Communication: Open and honest communication between you and your guarantor is essential to ensure that everyone is comfortable with the arrangement.

At BrokerCo, we are here to guide you through the process and ensure that you and your guarantor have all the information you need to make an informed decision. Contact us today to learn more about how a guarantor can help you secure your first home.