Guarantors - demystifying the guarantor loan scenario.

Guarantor loans are when direct relatives i.e. parents and/or siblings can contribute towards the deposit of a loan by using equity in their existing property as security. The policies and requirements are vastly different between lenders but the products allow the opportunity for first home buyers wanting to get into the property market to do so.

My experience has been mostly whereby the first home buyers borrow 80% of the purchase price and their guarantors then borrow the 20% plus costs to complete the transaction - 105% lend.

In finance terms, a loan guarantee is a fall back if the borrower defaults or can’t afford to repay the debt, the responsibility of that debt then falls to the guarantor to service the loan.