Over the past two years, average capital city
house prices have risen by around 16 per cent. That’s great if you’re an investor. But for first home buyers trying to save for
a deposit, it’s like chasing your own tail. Luckily, there are ways to get into the property
market now without having to sell your own mum. In fact, you’ll need her! If you don’t have a deposit and your parents
own their own house, one common strategy is to apply for a guarantor loan. The plus side of this type of finance is that
you may be able to borrow up to 105% of the purchase price, including stamp duty and the
other costs associated with buying a home. On top of that, you won’t be required to
pay lenders mortgage insurance, a one off fee usually charged when borrowing more than
80% of the purchase price. With some lenders you can even get massively discounted interest
rates. All this with no deposit down! Whoah now! Don’t rush out the door just
yet. There’s a few things to keep in mind. Some lenders will accept a second mortgage
on your parents’ home but there need to be sufficient existing equity in the property. Other lenders will not accept a second home
loan at all and may even require that your parents have a job in order to mitigate some
of the risk. Alternatively, your parents can use an investment
property or money in a term deposit as security for the guarantee. Although you won’t need a deposit with a
guarantor loan, some lenders have harsh scoring and may require borrowers to have at least
some savings in their own name. Luckily, your parents can either gift or lend
you the money for the deposit. In addition, some lenders will even consolidate any small
existing debt you might have including credit cards or car loans into your mortgage.
You should aim to remove the guarantee as soon as you owe less than 80% of the property
value, either from the property going up in price or you paying off the loan. Most people
are able to remove the guarantee around 3 to 5 years after they initially set up the
loan. If you’re struggling to save for a deposit
in a rising property market, now’s the time to be that extra little bit nicer to your
Mum and Dad. A guarantor loan may help you buy your dream home.
Our mortgage brokers are experts in guarantor loans and we know which lenders can help!
So, call us today for a free, no obligation assessment.