Guarantor for a loan

K

Kiwibaz

Hi everyone,

My question is for all the finance guys out there. Can anyone explain the rules regarding going garantor for a loan.

I am looking at a development block and have the income to cover the repayments on a loan but don't think the bank will give me anymore money due to other commitents.

Is it likely that i could get a guarantor for the loan that the bank would accept, and if i did would they need equity, cash in bank or income to make them more attractive to the bank.

Thanks

Baz
 
Hi Baz,

You can't just use a guarantor for servicing purpose unless its a spousal arrangement. The other party would need to have a vested interested in the property, i.e. be on the title.

How much are you falling short by?

I assume you know that different banks will lend different amounts and there are things you can do to increase your servicing depending on the situation.
 
Thanks for the advice. Maybe a few more details are needed.

The purchase for the land is approx $650k. i reckon that i could (just) get this on my own at a %90 lend based on current income and an existing develpment that is still ongoing.

Where we would fall down would be the 800k need to develop the block. My wife is newly selfemployed (less than one year) so her 80k a year can't be used and my work is very well paid (200k approx) but is causal. This leaves us with plenty of money to make the repayments but not really that great to look at on paper which is why i think the bank will not want to know me and why i was hope to get a guarantor to the loan.
 
One reason not to buy in your own name is lack of flexibility.

If you had the land owned by a unit trust then you could easily introduce outsiders as guarantors if and when required - possibly without any need to change ownership of units so no stamp duty or CGT consequences. Certainly no need to change title to the land.

If you buy in your own name no chance.
 
Kiwibaz - it all depends on the arrangement and purpose. What is the development going to entail? How long is the development DA process going to take? Maybe by the time you start construction your wife will be able to prove her financials and then you can use it? Maybe if it is commercial deal then servicing isn't even needed at all? So many questions...
 
If you are going to enter into a guarantee of some description, it should be right from the beginning. Start with the end in mind. It will be painful and possibly expensive if you buy the land then later look for an equity guarantee to complete the construction. Far better to have the guarantor in on the deal from the start.
 
What are you building with $800k? Is it multi dwellings? Can you use one of the properties as a rental property to assist with your servicing?
 
So many questions, please sit down with a banker/broker/financial planner/accountant (possible even a few of these) and work out what your wanting to do and get the structure right.

As stated above, depending a what your looking at actually doing there is so many different answers.
 
Kiwibaz said:
Hi everyone,

My question is for all the finance guys out there. Can anyone explain the rules regarding going garantor for a loan.

I am looking at a development block and have the income to cover the repayments on a loan but don't think the bank will give me anymore money due to other commitents.

Is it likely that i could get a guarantor for the loan that the bank would accept, and if i did would they need equity, cash in bank or income to make them more attractive to the bank.

Thanks

Baz
Click to expand...

Baz,
Talk to one of the brokers below and work out your situation truly before worrying about guarantors etc.
Depending on the number of units you want to put on the block it may have to be a commercial deal, some banks will look more favourably at your servicing and the brokers will be able to judge that without putting in an application and advise you before you put an offer on the block.
 
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