How Can I Help My Kids Get In To Their Own Home?
Helping your kids earn their independence is a big deal for you as a parent, right? Do you ever wonder how you can help your kids get their own house? A parental loan guarantee is one of the options you can choose when helping your kids get in to their own home. Also known as a family guarantee, it allows you to assist your immediate family, particularly your kids, to secure their home loan.
You become the guarantor or the person that provides the assistance through this type of home loan. Keep reading to learn more about the parental loan guarantee and know how you can maximize this option to expedite your kids’ transfer to their own dream house.
How the Parent Guarantee Home Loan Works
You as the parent are the guarantor in this type of loan. As the guarantor, you are allowed to link your own property equity to your kid’s loan and use it as additional loan security. Therefore, your property or house becomes the secondary security for your kid’s home loan.
Another massive benifit, a family guarantee helps your kids avoid paying for the Lenders Mortgage Insurance or LMI.
Are you qualified to be a Guarantor?
Family members are generally the only ones allowed to become guarantors of the home loan. Those that are normally allowed to become guarantors are parents, grandparents and siblings. Do you want to become a guarantor of an extended family member? Don’t worry because there are also lenders that allow this type of arrangement, even some that may consider friends of the family.
Benefits of a Parent Guarantee Loan
A family guarantee allows your kids to secure the loan to buy a house or property if they don’t have enough deposit. Is it that easy? Make sure your family member can afford to repay the home loan. Even with a good parental guarantee, your chances of getting approved are not guaranteed if you don’t have the ability to meet the minimum repayment.
The loan allows your kids to get into their home much faster because it helps boost the amount they can borrow and avoids mortgage insurance. The amount of the guarantee depends on the policies of the lender. For example, the guarantee can be for only a portion of the loan amount or could cover the entire loan.
Are there repercussions?
The obvious setback is when the borrower fails to pay back the loan. As a guarantor, you are legally liable to repay the amount that is indicated in the guarantee. However, the guarantor can also be released from any liability. That’s because a guarantor can be released from the loan even when the loan amount is not yet repaid in full, as long as the circumstances meet the lenders policy.
Helping your kids get in to their own home makes financial sense especially if they are ready to take on this crucial step of independence. Consult with one of our certified mortgage broker today for details about parent guarantee loan!
Regards, Daniel Reid – Mortgage Broker, Director – Emanate Finance