Gerard Tiffen’s Blog: Guarantor Home Loans

By: Gerard Tiffen (Managing Director of Tiffen & Co)

Here at Tiffen & Co, I submit approximately five guarantor home loan applications every month. This number has been on the steady incline due to the many benefits using a guarantor home loan structure has, one of which is the fact that guarantor home loans can potentially save you thousands of dollars in mortgage insurance.

First of all, I will start by explaining what a guarantor home loan is. A guarantor home loan is when another person (such as a parent) puts up a property they own (or have equity in) as security, allowing the borrower to borrow up to 107% of the purchase price of a home without needing a deposit.

So, you may ask how this helps you avoid paying lender’s mortgage insurance? Well, normally when someone borrows more than 80% of the property value, the bank will make you pay mortgage insurance on the off chance that you can’t make the repayments. If you choose to use the guarantor home loan option however, this insurance is waived.

The way this works comes down to how I structure the loan and let’s keep in mind that the main goal here is to pay off and release the guarantor as quickly as possible. I structure the loan so that the guarantor is protected, ensuring that they are not at risk of losing the family home or the property they have offered as security. I utilise both Principle and Interest and Interest Only loans and am more than happy to sit down with you and your potential guarantor to discuss how this would work in your particular circumstance.

Guarantor is a great option for first home buyers, people looking to upgrade their existing home or purchasing a second property. It is also a great option for those who have recently lost a lot of savings due to something like a bad investment or separation. The other week I had a client who had a large portion of their savings tied up in a separate investment, so their father went guarantor for the purchase of a new property therefore allowing them to purchase the property without incurring mortgage insurance.

An added benefit of guarantor home loans is that they can utilise something called a limited guarantee which is where the guarantor can minimise the amount of guarantee or equity used so they can use the remaining equity for other purposes, such as for their own investment or use it to go guarantor for more than one child.

I have personally been a guarantor for a couple of my staff and I loved being able to help someone I care about purchase their first property.

If you’d like to discuss whether a guarantor home loan is appropriate for your situation please call the team at Tiffen & Co and speak to one of our friendly mortgage brokers. As highly qualified, multi-award winning and experienced mortgage brokers, we can help you work out the best solution for your personal circumstances. Call 02 6264 7880 today!