Saving a decent home-buying deposit can be difficult, especially if you're renting. But there is a solution - having a 'guarantor'.
A guarantor is someone - usually a parent or a family member - who offers their own home as extra security for your loan, so you don't have to have cash for a deposit or the cash for the other costs like stamp duty and conveyancing.
The guarantor isn't required to make any payments on your loan. But if you can no longer keep up your repayments, the lender will turn to the guarantor to make the repayments.
The big plus for home buyers is the extra security a guarantor provides. It means you may be able to secure a home loan with just a small deposit – or even no deposit at all. It could also mean avoiding expensive Lenders Mortgage Insurance (LMI) – a saving that can run into thousands of dollars.
The lender will still check you can comfortably manage the loan repayments, but having a guarantor can fast-track you into a place of your own.
Anyone agreeing to act as a guarantor should seek independent legal advice. Lenders insist on this. That's because when you sign your name as a guarantor, you could become legally responsible for paying back the entire loan if the original borrower can’t keep up the repayments.
If you are considering this, it's definitely worth talking to us about using, or becoming, a guarantor. We understand the different requirements of each lender when it comes to having a guarantor, and this could help you cut through the clutter to find the loan that's right for your needs.