Family Pledge Guarantor Loan

First Home Buyers with no deposit can use their mum and dad and sometimes other family or friends to assist.

Mum and Dad have a property in which they live in. Kids can get the 20% of their purchase plus the cost of stamp duty and other costs and fees related to the purchase from the equity of their parent’s home. The other 80% will be secured by the property the Kids are purchasing. It is important that the Kids are able to service the full 100 % of the loan. This scenario will save the First Home Buyer Kids the cost of Lender's Mortgage Insurance which can amount to thousands.

If the parents have a loan in their home, we can either get the loan of the kids from the same lender where the parents’ loan sits or bring the parents’ loan to another lender where the kids are borrowing to purchase their first home.

Should Dad and Mum be working?

Most lenders will require that parents are working or at least one of them is. It is also important that parents get financial advice before they decide to help their kids. This option is known as Family Guarantee, Family Equity, Family Pledge or Parental Guarantee depending on the lender.

Should Kids need to provide proof of 5% Genuine Savings?

The 5% Genuine Savings Policy no longer applies with the Family Pledge scenario.

Scenario

First Home Buyers wishes to purchase a block of land for $350,000 and build for $300,000. Their parent's property is worth $700,000 with nil debt attached to it. Both the parents are working and are happy to use the equity of their home to provide the 20% deposit and other associated costs to purchase to help their children buy their first home. A Mortgage broker has assessed the First Home Buyers’ income, liabilities and expenses and the assessment shows that the FHB can afford the full loan of $650,000.

All of the major lenders, CBA, NAB, Westpac and ANZ will consider this scenario. My job as a mortgage broker is to structure the loan in such a way that the loan secured by the parent's home is paid out as quickly as possible. It is also possible that once the property of the First Home Buyer Kids increase in value, the equity is released to pay out the loan secured by parents’ property.