First home buyers in Sydney who have trouble saving funds for a deposit will see relief, following recent changes by some lenders to guarantor requirements.
Sydney-based Loan Market broker Lee Banh said family and security guarantee loans were available to help first home buyers and families entering the residential real estate market that needed an additional asset to secure their property.
Some lenders recently amended their policies, removing certain restrictions for guarantors to include extended family members, according to Mr Banh.
The changes now mean a guarantor will no longer have to be a parent, sibling or spouse of the borrower for a security guarantee, which was formerly know as a family guarantee.
“This change in policy is going to help certain first home buyers with healthy incomes but limited savings enter the property market with help from guarantees who traditionally haven’t been allowed to put their support behind a low-deposit holder’s mortgage,” Mr Banh said.
“Most guarantee loans are a single loan secured by both properties: the property purchased by the first home buyer and guarantors' property. The benefit of this option is that there is no requirement to make a Lenders Mortgage Insurance (LMI) payment and that you don’t have to demonstrate that a deposit you have was genuinely saved.”
However, Mr Banh suggested considerations that both borrowers and guarantors need to take into account.
Borrowers should think carefully about the implications of borrowing against a security provided by a family member or friend, consider alternatives, and talk to a professional who can reccomend the right loan product.
Guarantors should always seek financial and legal advice before signing documents, be aware of their legal responsibilities, and consider other options.