Family Guarantee Home Loans
Buy Property Sooner With Help From Your Family
Saving a large deposit can be one of the biggest barriers to buying a home.
A Family Guarantee Home Loan may allow an eligible family member to use property equity as additional security.
This can help reduce the lender's effective LVR and potentially allow you to purchase sooner without paying LMI.
At My Finance Consultants, we assess both the borrower and proposed guarantor before comparing suitable lenders.
We structure the guarantee, explain the lending requirements and establish a potential pathway for releasing the guarantee later.
How Does a Family Guarantee Work?
The lender takes security over the property you purchase.
An eligible family member also provides a guarantee supported by equity in their property.
The guarantee can generally be limited to an agreed portion of the home loan, rather than covering the entire debt.
This additional security may reduce the effective LVR to a level where Lenders Mortgage Insurance is not required.
You remain responsible for making the home loan repayments from your own financial position.
The guarantor is providing additional security, not replacing your requirement to demonstrate that the loan is affordable.
Use our Borrowing Power Calculator for an initial borrowing estimate.
Our Buying Power Calculator can also help estimate the property price that may be within reach.
Benefits of a Family Guarantee
Purchase With a Smaller Deposit
A family guarantee may reduce the amount you need to contribute from your own savings.
This can help you enter the property market sooner rather than waiting to accumulate a 20% deposit.
You will generally still need funds for stamp duty, conveyancing, inspections and other purchasing costs.
Potentially Avoid LMI
Lenders commonly require LMI when the effective LVR exceeds their standard no-LMI threshold.
Additional family security may reduce the effective LVR sufficiently to avoid this cost.
LMI protects the lender rather than the borrower.
Retain More of Your Savings
Using family security may allow you to retain more savings after settlement.
Those funds could remain available for moving costs, property expenses or an emergency buffer.
Keeping a buffer can be particularly valuable when adjusting to home ownership and new repayments.
Our Mortgage Repayment Calculator can help you estimate repayments.
You can also use our Stamp Duty Calculator to estimate selected purchasing costs.
Understand the Guarantor's Commitment
Providing a guarantee creates a real financial and legal obligation.
If the borrower cannot repay the loan, the lender may seek payment from the guarantor up to the guaranteed amount.
The property supporting the guarantee may therefore be at risk.
Providing a guarantee can also affect the guarantor's ability to borrow for their own purposes.
This can be particularly important for parents approaching retirement, refinancing or planning another property purchase.
Guarantors should obtain independent legal advice and consider independent financial advice before proceeding.
We structure the guarantee with the objective of limiting exposure where the lender's policy allows.
Releasing the Family Guarantee
A family guarantee does not necessarily need to remain in place for the entire home loan term.
Over time, your loan balance may reduce through repayments.
Your property value may also change, increasing or reducing your equity position.
Once the loan and property value meet the lender's requirements, you may be able to apply to release the guarantor.
The lender may require a new property valuation and satisfactory repayment history.
An acceptable LVR will also generally be required.
Reaching 80% LVR does not automatically release the guarantee. The lender must approve the release and complete its required process.
We can review your position periodically and help arrange the release when the lender's requirements are satisfied.
Eligibility, Lenders & Alternatives
What Lenders Consider
The borrower must generally satisfy the lender's normal income, serviceability, credit and property requirements.
The lender will also assess the guarantor, their property and available equity.
Who can act as guarantor varies between lenders.
Parents are commonly accepted, while selected lenders may consider other eligible family members.
Compare the Complete Loan
A family guarantee should not be chosen simply because it avoids LMI.
We compare suitable lenders across rates, comparison rates, fees, features and guarantor requirements.
The objective is to find an appropriate overall lending structure.
Alternatives to a Family Guarantee
A guarantee may not be necessary in every situation.
Depending on your circumstances, alternatives can include a larger deposit, gifted funds or an eligible government home-buyer scheme.
Paying LMI and purchasing without family security may also be worth comparing.
We consider the available options before recommending a guarantee.
Our Family Guarantee Home Loan Process
Borrower & Guarantor Review
We discuss your income, deposit, property plans and borrowing requirements.
We also review the proposed guarantor's property and equity position.
Compare Suitable Lenders
We compare suitable policies across our lender panel.
This includes guarantor eligibility, maximum lending, LMI treatment, rates and relevant loan features.
Structure & Application
Where appropriate, we structure a limited family guarantee and prepare the home loan application.
We coordinate the required borrower, guarantor and property documentation.
The guarantor completes the lender's required advice and documentation process before settlement.
Settlement & Release Strategy
We coordinate lender requirements through approval and settlement.
After settlement, we can review the loan periodically to determine whether the guarantee may be eligible for release.
Frequently Asked Questions
Who Can Be a Guarantor?
Parents are commonly accepted.
Selected lenders may consider other close family members, subject to their eligibility requirements.
We confirm the lender's current policy before applying.
Does a Family Guarantee Mean My Parents Make My Repayments?
No. You must generally demonstrate that you can service the home loan from your own financial position.
The guarantor provides additional security rather than taking responsibility for your normal monthly repayments.
How Much Does the Guarantor Need to Guarantee?
The guarantee may be limited to the amount required to support the lending structure.
It does not necessarily need to cover the entire home loan.
The required amount depends on the lender, purchase price, deposit and valuation.
Can a Family Guarantee Help Me Avoid LMI?
Potentially. Additional family security may reduce the effective LVR sufficiently for the lender's standard no-LMI requirements.
Can the Guarantee Be Released Later?
You can generally request release when your loan balance, property value and overall position satisfy the lender's requirements.
A valuation and lender approval may be required.
What Happens if I Cannot Repay the Loan?
The lender can take recovery action against you.
Where a shortfall remains, the guarantor may also be liable up to the amount covered by their guarantee.
Do Guarantors Need Independent Legal Advice?
Lender requirements vary, but independent legal advice is commonly required or strongly recommended.
It helps ensure the guarantor understands the risks, obligations and potential consequences of providing the guarantee.
Is a Family Guarantee Better Than Paying LMI?
Not always. A guarantee may reduce LMI costs but places financial risk on the guarantor.
We compare the available lending options, costs and family-security implications before recommending a structure.