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Revealed: Important new information for First Time Buyers.
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Home Loan Guarantor

If an applicant does not meet the criteria necessary to obtain a standard home loan, the lender may ask for a guarantor.  Usually this occurs if the applicant has bad credit, no deposit or perhaps is self employed with little proof of income. 

This means that someone acts as a guarantor for your mortgage, meaning they can be liable to repay the loan if you cannot.  People on low incomes and many young people are often asked to provide a guarantor for a loan. The reason for this is that the credit provider has serious doubts about the person's ability to repay the loan, especially if they were to become sick, injured or unemployed.

Guaranteeing a loan is more than 'just a formality'.  You will become legally liable to repay the loan if the mortgage holder cannot. 

Obviously this is quite a big deal!  If you are acting guarantor for your children, ensure you know how and when they will make repayments, and how much.  You need to be sure that they can afford to repay the loan.

This is not a decision to take lightly.  Talk it through with your family, and with a professional mortgage broker, to ensure you understand the contract you are signing.  In the right circumstances, guaranteeing a home loan can be a fantastic way of helping a loved one purchase a property, and it need not cost you anything as long as the mortgage holder repays the loan themselves and does not default.

If you are applying for a mortgage with a guarantor, the mortgage still goes in your name so you are still eligible for government grants, such as the First Home Buyer Grant.  And as this is more of a policy rather than a type of loan, you can still access fantastic interest rates.


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