My name is sarah and i want to purchase my first investment property. At present I have two part-time jobs and have my own vending machine business....but my goal is to own my first investment property by the time i'm 18.
How does someone of my age get a loan from a bank?
Just a quick question, say my "consenting guarantor" was my dad...what does it mean? Does it mean the property is owned by my dad? or it is my property shared with my dad? and what happens when I turn the "legal age" where does my dad fit into the picture then???
Firstly good on you for starting to invest at such a young age.
I work for a finance company and although I am not a banker by any means my knowledge of guarantors is that they are responsible for repaying the loan if the first borrower defaults. Unless it is specified on the title of the property your dad does not hold any interest in the property (to the best of my knowledge) he may request his name on the title to protect his interest though - I certainly would!
While he is a guarantor, he will have to declare this loan for any credit he applies for and it may affect his borrowing capacity - make sure he is aware of this as it is surprising how many people are not!
Once you turn 18 you may look at refinancing the loan if your dad wants out but he will be guarantor for as long as the loan exists in it's original state.
The bank you apply through will give you more detailed information during the application process.
For your information, someone under 18 CAN buy property, (or have it bought for them) but they may have trouble selling it, as they need to be able to show that they understand the implications of selling it. (Shouldn't be a problem in your case).
By the way, Where are you? Can you put a general location in your profile, please (Just state will do!!), this makes it easier when answering legal and logistical questions.
To answer your questions, if your dad goes guarantor it means that you own the property, but as far as the bank is concerned, if you default they will come after him because he guaranteed that you would pay the repayments.
This type of agreement will only affect your dad if you default, or if he wants to apply for another loan, as this one will be considered by the bank as if he actually borrowed the money.
well done and congratulations. One point to think about is using a trust to hold the property in which case your age isn't the problem (except regarding the guarantee which you'll have a slight problem with anyway).
This may not be ideal if you buy a property with negative cash flow. But your Vending machine business should probably not be in your own name anyway. That may provide sufficient cashflow to offset any loss on the property.
This is a general post. Let me know if you don't get any of it. Happy to go into more detail if you are interested.
My basic advice is the loan isn't the problem if you find a good deal.