Why choose a Guarantor Home Loan?
One of the main benefits of having a guarantor on your home loan is that it may help you avoid paying Lenders Mortgage Insurance (LMI). It can be paid upfront as a one-off or added to your loan repayments, depending on the lender. A guarantor could also help you secure funding from a bank if you don’t have enough saved for a 20% deposit, and can help reassure the bank that mortgage repayments will be covered even if something unexpected occurs and you can’t pay.
The main risks and drawbacks associated with a guarantor home loan are for the guarantor, who is ultimately liable to cover mortgage repayments and fees if the borrower is unable to. Any potential guarantors should carefully consider the decision to go guarantor, as it could put their hard-earned savings or potentially their home at risk and delay retirement plans.
Lenders’ Views on Guarantor Home Loans
Some lenders may let you borrow up to or even above 100% of the value of the property you’re buying if you have a guarantor, but it really depends on the lender, your financial standing as a potential borrower and the circumstances of your proposed guarantor or guarantors, as well as factors like the size of your loan. As with any home loan, your lender will still consider whether you can afford your loan repayments, along with your track record of saving.