As dwelling prices continue to rise across the country, more first homebuyers are looking to their parents and immediate family members to act as guarantors on their home loans.
The results of the annual First Home Buyer Survey conducted by Mortgage Choice revealed that in 2016, the percentage of buyers who had family acting as guarantors was 4.9%, representing an increase of a full 1% since 2015.
Given current conditions, John Flavell, CEO of Mortgage Choice, said this increase was to be expected.
“This slight jump in demand for home loan guarantors is unsurprising when you consider that property prices have risen fairly substantially across most property markets over the past few years. Many first home buyers are finding it difficult to put a foot on the property ladder without some form of financial support,” Flavell said.
These figures represent one in 20 buyers using a guarantor, wherein a lender is granted permission to take out a mortgage over a property owned by the guarantor, in addition to the borrower’s own property.
Under this arrangement a lender gets additional security on the loan, while the borrower gets access to a loan they might not ordinarily qualify for, through the guarantor’s financial support.
Guarantors can later request to be released from their responsibility, once the buyer has generated adequate equity in their purchased property.
“By having a family member go guarantor on a home loan, first home buyers are not only able to get their foot on the property ladder sooner rather than later, but they can also potentially avoid paying Lenders Mortgage Insurance,” Flavell said.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Top Suburbs :
east victoria park
Get help financing your investment
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out