The Guarantor Home Loan (also known as Family Pledge Finance) is popular with first time home buyers. You may need a guarantor if you are considering a home loan and the lender/credit provider is concerned about the following factors:

1. You may not have saved the 20% deposit needed to buy your dream home

2. Your limited credit history, or

3. Your low income

Definition of a guarantor

A Guarantor is best defined as a third party (a family member or best friend) who agrees to repay a loan or any other liability in the event of default.

By having a guarantor, you may be able to purchase your dream home easily. Other benefits of having a guarantor can be:

>> Some lenders/credit providers will allow you to borrow 100% of the purchase price plus 5% of the costs of your first home gold investment property without the need for proof of savings

>> You’ll save on Lenders Mortgage Insurance (LMI) premium

The impacts of being a guarantor

Like many people, you may believe that your responsibility as a guarantor is limited only to ensuring that your Gold Best Friend family member pays the debt on time. However, as a guarantor, you are not only obligated to repay the loan amount if the borrower defaults, the purpose of the transaction can have a negative impact on your credit rating.

Have you been asked to be a guarantor for a loan?

If you have been asked to be a guarantor of a loan to support a family member or best friend, do not take the stress. Before you feel overwhelmed by the obligation to become a guarantor, you need to consider what you will get from the settlement since you will be responsible for repaying the loan if the borrower defaults on the loan. Because, as guarantor:

>> You are responsible in case the borrower does not pay his loan

>> You may be required to repay the portion of the loan for which you have posted collateral, in the event of a loan default

>> You can lose your house in case of default by the borrowers

>> You can provide your owner-occupied or investment property as collateral

>> You may need to refinance your existing loan to provide collateral to borrowers, and lenders/credit providers will need to undergo a full assessment of your financial position

>> Some lenders/credit providers may not accept second mortgages as collateral for collateral.

As part of the requirements of lenders/credit providers, guarantors will be required to seek independent legal and financial advice. Therefore, contact a reputable and experienced finance brokerage firm before becoming a guarantor. He will analyze your situation and help you make the right decision.