How do guaranteed home loans work?
A guaranteed home loan involves a guarantor (often a parent) promising to pay off a mortgage if the principal borrower (often the child) fails to do so. The guarantor will also have to provide security, which is often the family home.
The principal borrower will usually be someone struggling to find the money to enter the property market. By partnering with a guarantor, the borrower increases their financial power and becomes less of a risk in the eyes of lenders. As a result, the borrower may:
- Qualify for a mortgage that they would have otherwise been denied
- Not be required to pay lender’s mortgage insurance (LMI)
- Be charged a lower interest rate
- Be charged less in fees
Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.
The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.
That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.
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Here we are asking you to estimate only. It’s often hard to get an accurate estimate of your property value.
Some real estate websites such as Domain, Realestate.com.au and Onthehouse will give you an estimate. However, be aware that a bank valuer might assume a lower estimate, so it can be a good idea to make your estimate slightly lower.
If you do apply to refinance, the lender might send a valuer out to your home, so it is worth being prudent.
Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.
However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.
Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.
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