Guarantor for 20% - does this limit your lendor?

Hi Just wondering if using parents as guarantor for the 20% of purchase price + stamp duty etc (ie. nothing out of my pocket) would limit my choice of lender.

Was looking at some of the low cost lenders like Ubank who have an extremely great 5 year rate in the low 5's or other lenders with lower variable rates.

Thanks in advance.
 
Hi Just wondering if using parents as guarantor for the 20% of purchase price + stamp duty etc (ie. nothing out of my pocket) would limit my choice of lender.

Was looking at some of the low cost lenders like Ubank who have an extremely great 5 year rate in the low 5's or other lenders with lower variable rates.

Thanks in advance.

Are you planning on having the guarantor locked in for 5 years? When having a guarantors you want to make sure it's done right. Looking for a low rate shouldn't be (just like most cases) the most important thing for you.

In fact locking in for 5 years for any time of loan is a long time. Is it PPOR or IP? Not many people know what they are doing in 3 years time let alone 5 years.
 
i see what you mean 5 years is a long time. Was looking for IP in a nice area where I can move into in 5 or so years before I "miss the boat", or is there no such boat? Hehe.
I guess I mainly wanted to find out if using guarantor as proposed above would give me a good range of lenders as opposed to doing 95% LVR and restricting available lenders.

Thanks
 
I'm curious why you don't have your own deposit rather than relying on family. I mean that's cool that they want to help you out and everything but if you have no disposable income or poor spending habits how will you go with repayments?
 
I bought an IP last year (currently renting), this chewed majority of my savings as I had no equity to use. hence the low deposit. Was thinking of saving over the next 5-10 years for a sizable deposit but am concerned the nicer areas will be out of my reach hence wanting to get in now.
 
Not all lenders will accept a guarantor and not all lenders will suit the guarantors circumstances. The policies of different lenders vary quite a lot on this topic.
 
I bought an IP last year (currently renting), this chewed majority of my savings as I had no equity to use. hence the low deposit. Was thinking of saving over the next 5-10 years for a sizable deposit but am concerned the nicer areas will be out of my reach hence wanting to get in now.

You're in adelaide , I can't think of any suburbs there that require 5-10yrs of saving for a deposit. In fact one of mine over there I used 9k I think.

Also is there any equity in ip you can use?
 
Maybe not a good idea to fix as this will limit your ability to move lenders which may make it easy to remove the guarantor.

Also have you considered a loan rather than a guarantee?
 
I never thought of getting a loan - how does this work, do I borrow funds from parents? In relation to fixing I'm worried homeloan rates will go to 9% in the next 5 years which would increase a $500k+ loan repayments quite a bit. do you mean for the parents to give me a loan and I pay them back.

Looking to pay approx. $500k (it would take me 7-10 years to save 20% deposit + stamp duties etc.) - current situation (ie. no pay rises, no equity in IP etc.
 
I've personally used a family guarantor for 2 properties. It allowed me to preserve my own funds for future purchases. First 2 properties I didn't put a cent in (besides small renovation) and still haven't reduced the total debt, just increased the debt secured against the purchase property and decreased the guarantor loan. Guarantor will be released in around 5 years from time of purchase.

This worked well for me, but doesn't mean it's for everyone. Most of the time I had the funds available to payoff the guarantor loans. 1 loan was secured by family cash (a loan from them would of worked in a similar way, but for my bank it's easy to establish) and other was using an IP of my parents.

I have fixed the loans during the period as well, but both have been 2 years and at the end of the fixed period when goes back to variable I top up at mentioned above.

Also worth mentioning that these properties weren't super expensive both <$300k properties, so gurantors were only liable for ~$110k at the peak for both properties.


If you do go down the path of family guarantor make sure you have a good discussion with the guarantors around how long until they expect to be realeased, as many times families sign on thinking they are helping, then want to make changes of there own only to end up in a little family fued.

In some cases it works well having the 80% as IO and the 20%+fees as P&I and make all extra repayments off the 20% to release guarantors.
 
In some cases it works well having the 80% as IO and the 20%+fees as P&I and make all extra repayments off the 20% to release guarantors.

sound advice in many scenarios, esp where the guarantee Prop is a PPOR, yes its not great for future tax deductability, but removing the guarantors risk asap is basic risk management tool.

ta
rolf
 
Thankyou all for your suggestions. I will consider these options, esp. the 20% as P&I.
I'm not too concerned about tax deductibility as the property should hopefully be a PPOR in the next 5-10 years.
I will also consider holding off till have sufficient 20% deposit, or even consider a cheapie IP in Elizabeth area and hopefully helps equity situation in 5 years (doubtful though).

Thanks again.
 
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