What Is Involved with a Guarantor Home Loan?

Traditional no-deposit home loans are no longer an option for homebuyers. Now, borrowers must seek a guarantor home loan in order to borrow 100 percent or more of the value of the property being purchased. A guarantor loan is when someone other than the borrower places their own property or income as a guarantee that the loan or part of the loan will be paid if you default. Most lenders require the guarantor to be a family member.

With a guarantor loan, it is not only the property being purchased that is at risk, it is also the property of the guarantor that was used to secure the loan. Therefore, the guarantor must have a certain amount of equity in their home in order to be approved as a guarantor.

Guarantees can be removed from the loan typically between 2 and 5 years after the loan is initiated. In order to remove the guarantee, you must be able to afford the repayments without assistance, have brought the loan amount down to 80 to 90 percent of the initial loan and haven’t missed a payment in the preceding six to twelve months.

It is recommended to utilise an expert to assist you with establishing a guarantor loan.

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