Does going guarantor affect DSR?

Hi everyone,

My DSR is being destroyed by the fact that I have a largish mortage on PPOR ($160,000), but my partner is entirely responsible for servicing it in reality (I have paid off my share). His income is not enough to keep the lender happy, but the truth is I put nothing into the loan. What if I just become a guarantor of the loan - would it alleviate my DSR problems (or would other lenders count it in in some way).

One other thing: what would stop you using personal loan as a deposit on an IP? They seem to give them out pretty easily and for just about anything. Has anyone done it?

From what I have read on this forum, even being a guarantor seems to have some effect on your DSR.

Using a Personal Loan as a deposit on an IP seems like a bad idea to me. Longest personal loan you can get is say 7 years, so your perceived repayments will be higher than with a typical P&I loan, and the banks will then include the personal loan repayments when calculating DSR.
Hi Gail

A serviceability guarantee will only be taken where the guarantor can generally service the entire debt. Therefore, when assessing DSR and the like the lenders will generally take the pessimistic approach and take the guarantee into acct.

There are some exceptions to this but my general rule of thumb is a guarantee in a personal capacity is effectively the same as having the loan itself.

As for personal loans for deposits, yep done regulary BUT will not be much fun for the DSR. Also many lenders will give you a loan for a holiday but not for deposit for property - nuts, but there you go.

G'day all,

Also many lenders will give you a loan for a holiday but not for deposit for property

But then, you could always have a "holiday" purchasing and doing up a property!! :)

"Aw, shucks, lender, I just changed my mind, that's all...."

Yes, I must admit, I've always wondered how they'd know what the hell you actually spent it on.

Rolf, I notice the personal loans for cars are a bit less, even second hand. I gather the lenders would want proof that you bought a car and would secure the loan against the car. Is that right.

Re the guarantee, is there anyway it could be concealed from another lender. I know you would never advocate it Rolf, but let's just say hypothetically speaking. Would it show up if they did a credit check thinggy, if you were just a guarantor?

Hi Gail

Steve McKnight has found a way around it, though I dont feel his methods apply to "normal" investors.

Re the car loan, the lender will want to usually make out a bank cheque to the dealer, and sometimes yes they will alos want a bill of sale.