Loan Guarantor

Hello everyone,

About 2-3 weeks ago i made a post about going into a partnership with my father in purchasing investment properties, after looking at the pros and cons it seems like there was more cons than pros.

Dad is still willing to help me out as im only 20yo as being a guarantor to my loans, i was wondering how this works and is it an affective method of borrowing more?

Has anyone used this method to increase there borrowing capabilities? If so are there any cons that i should be aware of?

Thanks in advance
 
morganp,

This was discussed at length on here: http://www.somersoft.com/forums/showthread.php?t=51986

Have a read.

Thanks i had a read although my circumstance is a bit different.

I already own a property in my name dad would be going guarantor for an IP, which will be rented out etc.

We would look at getting a legal document in which if by some circumstances i was to default on repayments he would recover the % of the house in which he has had to pay.

Dad would only be guarantor to provide higher lending capability.
 
Dad is still willing to help me out as im only 20yo as being a guarantor to my loans, i was wondering how this works and is it an affective method of borrowing more?

Yes, you will be able to borrow more. You will be restricted only by the amount the lender considers you can afford to repay. This may be considerably MORE than you would think.


We would look at getting a legal document in which if by some circumstances i was to default on repayments he would recover the % of the house in which he has had to pay.

If you default on the loan payments the lender will sue your father as guarantor. If he cannot repay the loan, the IP will be sold and you will receive any money left over after the loans have been paid out. If there is no excess, your you and your father will receive nothing. If there is a shortfall, you and your father will be sued for the amount still owing. This will mean other assets may have to be sold.

This will leave a default on both of your credit records.
Marg
 
Hi Morgan,

As long as understand that your father will need to provide full financials. Your father will be under obligation to seek proper Legal Advice to completely understand his obligations to your loan.

Is your father using equity in his own property?

If so: Is it unencumbered by a bank (no mortgage).

Are you using equity in your existing property to pay for the deposit?

It is certainly feasible with any of the above.

It's great that you have such a good relationship with your father.:)

Regards JO
 
Hi Morgan,

As long as understand that your father will need to provide full financials. Your father will be under obligation to seek proper Legal Advice to completely understand his obligations to your loan.

Is your father using equity in his own property?

If so: Is it unencumbered by a bank (no mortgage).

Are you using equity in your existing property to pay for the deposit?

It is certainly feasible with any of the above.

It's great that you have such a good relationship with your father.:)

Regards JO

Thanks for your replies it is much appreciated.


Is your father using equity in his own property? Yes, dad will be using equity of his investment property to help with finance. The property has about $20,000 left owing and is valued around the $350,000 mark. He also has another property that he lives in and is fully paid off.


Are you using equity in your existing property to pay for the deposit? I have paid off about 30% of the purchase price on my first IP and the rent covers mortgage repayments, i am about to move into it for 6 months to receive the first home owners grant and with that $14k plus the amount i have saved it will be enough for a deposit.

Yep dad has been really supportive with my investing etc, got me a credit card when i was 14 so i could start an online business etc.
 
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