Limited guarantee

[Propertynewby]

Question re financing IP?s

On my first purchase I used a ?limited Family guarantee.? Essentially means borrowing 100 -105% & avoiding LMI due to a $80k guarantee (20% of $400k purchase) put on my parents? home.

My question is this: Can I use this process for myself?

E.g. let?s say this unit in 5 years is worth $570,000 and has debt of $400,000. (70%LVR). By this time the limited family guarantee would have been removed.

Can I purchase another unit using a deposit comprising of either of the following:

1) Limited guarantee of up to $170k (up to 100%LVR) on IP1

2) limited guarantee of up to $56k (up to 80%LVR) on IP1

Essentially this would mean cross-collateralizing, but only in the short term, as the limited guarantee would drop off and I could re-finance with another lender?

Thoughts?

 

[Terry_w]

You cannot guarantee yourself.

Why not just borrow under a separate loan.

 

[Corey Batt]

All you need to do is setup an equity release against the first property for the deposit funds, then put this towards the next property purchase which will have it's own secured finance for the remaining funds.

No guarantees, no cross collateralisation - what's not to like.

 

[Propertynewby]

You cannot guarantee yourself.

Why not just borrow under a separate loan.

I was hoping that my bank could take a limited guarantee on the remaining equity in IP1 ($170k) and I could then fund 100% again for IP2.

I was under the impression you can only withdraw cash up to 80%LVR? Hence why I am looking for a way to utilise all of the equity in IP1 to essentially have a larger dep and buy a more expensive property.

I guess I will just have to wait longer or save harder.

Thanks for you input

 

[Propertynewby]

Is there a limit to how many times I can use a famiy guarantee?

Can I keep repeating the process once each guarantee is removed?

 

[tobe]

some lenders will only use a guarantee for PPOR's. So they wont let you use it a second time for an investment property.

Make a friend of LMI. Go to 90% on the top up, and then 90% on the new purchase if you haven't got enough equity to do the deal at 80% LVR.

 

[Redom]

Is there a limit to how many times I can use a famiy guarantee?

Can I keep repeating the process once each guarantee is removed?

I've never tested it, but have asked the question before and ANZ apparently can do it. St George no.

In terms of repeating once its removed - yes i don't see why not.

With regards to OP - if you wanted too (not advised), depending on the lender, you may be able to do an equity release on the gain in the value of your property and keep the guarantor. That way you don't have to use the equity gain to pay it back, but can use it instead to fund IPs. The guarantor will need to sign off on it again, but it won't be using their security. They're just party to the loan and will need to be aware and sign off on it.

Cheers,
Redom

 

[Marty McDonald]

I would think you would want to get them off asap though? Best to get to 80% and then stand alone going forward I would think.

 

[Terry_w]

These guarantees involve a mortgage on the parent's property. So the total LVR must be under an acceptabe level which is usually 80%.

If a parent had an property with a mortgage to bank A, then the child will usually need to go to bank A as well or bring th parent's loan over to Bank B with them - i.e. both at the same bank. However these days a few will accept second mortgages over the parents property. So the parent may stay at ING and the son go to ANZ and ANZ will take a mortgage over the parent's property behind ING.

If the parent had 2 children it might even be possible to guarantee both as long as the parent's LVR is under 80% (never tried this though).