Saving up for a deposit is not an easy task, and it often needs hard work and a lot of sacrifice. There are many obstacles to overcome to ensure that the home buying journey goes smoothly and that ownership is achieved in a reasonable timeframe.

If you have an immediate family member who can act as a security guarantor for your loan application, this can reduce (or remove) the need to save a deposit, helping you get into the property market and paying down a home loan sooner.

Applying for a home loan with a guarantor does not increase how much you can borrow, and does not mean the lender will change or ignore any of their usual qualification criteria – other than the need for a 5%, 10% or 20% deposit. An eligible guarantor must be an immediate family member who owns their own home, or has at least 50% equity if they are still paying down a mortgage of their own.

The nature of a security guarantee means the borrower will take out a loan, with a portion of their home loan secured to the guarantor’s property.

While a guarantor doesn’t help you qualify if you don’t meet other lender criteria, including credit history, employment history and income requirements, a guarantor may help bring forward your purchase by a couple of years and also save thousands in Lenders Mortgage Insurance premiums. If you a First Home Buyer you can also qualify for the various stamp duty exemptions and First Home Owners Grant if you meet the criteria.

There are plenty of considerations for all borrowers & guarantors, including the independent legal advice a guarantor must receive before a lender will provide a mortgage with a security guarantor. If a prospective guarantor is planning on selling their property in the short-term, or applying for finance of their own, they may also not be a suitable guarantor due to additional restrictions that could be placed on a guarantor’s security property.

If you have an immediate family member who wants to help you into the property market, but isn’t sure where to start, get in touch with us and we will happily provide a no-obligation consultation on the process, and help to answer any questions you may have.

Contributor: Alex Jacques – Director Jacques Financial Group