As a mortgage broker, we see many first-time homebuyers face the hurdle of saving a sizable deposit. While a 20% deposit is often seen as the golden standard, it can feel like a distant goal, especially in today’s market. But what if we told you there’s a way to bridge that gap and get your foot on the property ladder sooner?
What is a guarantor?
Think of a guarantor as your “financial wingman.” This is usually a close family member, like a parent or sibling, who agrees to use the equity in their own home to support your loan application. This essentially provides lenders with additional security, making them more likely to approve your loan even with a lower deposit.
Benefits of using a guarantor:
- Lower deposit requirement: With a guarantor, you may be able to borrow up to 95% of the property value, significantly reducing the amount of your upfront deposit.
- Avoid Lenders Mortgage Insurance (LMI): LMI is an extra cost added to loans with a deposit less than 20%. Using a guarantor can help you dodge this expense, saving you thousands of dollars in the long run.
- Potentially lower interest rates: Some lenders reward the added security of a guarantor with more competitive interest rates, further lowering your monthly loan repayments.
It’s crucial to understand that being a guarantor is a serious commitment. If you can’t meet your loan repayments, the responsibility falls on your guarantor to cover the outstanding balance. This can have significant financial and emotional consequences for both parties, so open communication and transparency are key.
Don’t navigate this alone
Buying a home is a life-changing decision. As national award-winning brokers, we’re here to guide you through the entire process, including exploring the pros and cons of using a guarantor.
Together, we can assess your individual circumstances, financial goals, and risk tolerance to determine if this approach is the right fit for you.
Don’t let a lack of a large deposit hold you back from owning your dream home. Let’s chat and see if a guarantor could be the key that unlocks your path to homeownership.
Arranging finance can be stressful, especially with some lenders now taking extra steps including going through your living expenses and credit scoring (ouch!). And sometimes banks can make you feel like ‘just a number’. That’s why we want to do things differently: because you deserve better.
As a local family-owned business, our team takes the time to listen, answer your questions and make getting your home, car or equipment loan as easy as possible.
