Finance advice
Warren Dworcan

How an equity guarantor can help with your deposit

By Warren Dworcan

Having trouble getting together a deposit for your first investment property? An equity guarantor may be the way to go.

Blogger: Warren Dworcan, managing director, Rate Detective Finance

This type of loan is appropriate when the applicant/borrower’s (your) income is enough to cover the loan and repayments but they do not have the required savings for a deposit.

The maximum lending usually available is 95% of the property’s purchase price so generally a 5% deposit is required. Saving this amount can often be difficult, especially when paying rent, so a guarantor can provide their property as a secondary security, worth minimum 20% of the loan, to allow the applicant to borrow up to 100% of the purchase price. Guarantors are usually limited to immediate family members.

Another benefit of having a guarantor is that the borrower may save by avoiding Lender’s Mortgage Insurance (LMI) which is required when the loan is greater than 80% of the value of the property.

The lender will use the borrower’s property as the primary security but will also take a mortgage over the guarantor’s property. The guarantor’s current mortgage will not change and they will not be required to make repayments as that is the borrowers responsibility.

After the borrower has built up equity in their property the guarantor can request to be released from the loan.

Anyone who is considering becoming an equity guarantor for a property loan is advised to seek independent legal and financial advice before accepting the role. Most lenders will insist on this.

Example
Mr A wants to purchase a $500,000 property but does not have the $25,000 savings necessary for a deposit. As his income can cover a loan of $500,000 needed to purchase he can use his parents as guarantors and secure a portion of the loan against their property.
80% of the $500,000 ($400,000) will now be secured against the purchase property and the other 20% ($100,000) will be against his parent’s property. Therefore Mr A will no longer be required to come up with the $25,000 deposit.

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About the Blogger

Warren Dworcan

Warren Dworcan

Warren Dworcan is the Managing Director of Rate Detective Finance, which provides information to consumers about home loans, credit cards, personal loans and personal insurance.

Successfully assisting thousands of Australians with loan enquiries in excess of more than $1 billion, Warren alongside his highly qualified and dedicated staff are equipped to deal with all aspects and complexities associated with the mortgage market.

Over the last two years Warren has been dedicated to growing the business into becoming one of the leading independent brokerages in Australia.

Recently recognised as one of the top brokers in Australia, Warren was awarded the coveted Australian Broker of the Year award in both 2012 and 2013 at the Australian Broking Awards in Sydney.

Email:
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
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Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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