Guarantees

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The banks are very good at handling guarantees. In the past, your parents would have to guarantee the full value of your home loan – a pretty scary prospect!

Now they can just guarantee the portion to get you to a 20% deposit.

How does this work? Let’s take a $500,000 Home

  • 20% deposit = $100,000
  • You have $40,000

You then have 2 home loans:

  1. $400,000 – being the 80% of the property value
  2. $60,000 – this is the difference to get you to a 20% deposit. This loan is in the name of your parents and your parents’ home is included as security.

So, your parents are only responsible for the $60,000 if you don’t pay.

There are some extra requirements for this which sometimes means it doesn’t work or it feels harder

  • Your parents must complete home loan applications to access affordability for the home loan
  • Other properties must use the same bank for lending

With any option, but particularly this last one, I would suggest that your parents get some independent advice to make sure it is suitable for them.