Guarantors and Family Loans
In the current market, it has become harder for first home buyers to get a mortgage. Lenders almost always require a 20% deposit. Your parents can help by topping up your deposit or they can act as a guarantor.
Parents can gift you a deposit, but often they will want to avoid the tax implications if the amount is over $27,000 (or $54,000 for a couple.) The deposit can be done as either a gift or as a Deed of Debt. We will send you a Deed of Debt template that you can use with your mortgage application. The easiest option is for your parents to lend you a 5% to 20% deposit, interest-free for five years. We can always structure your mortgage to pay off your parents within the first five years.
Your parents may not have enough cash available to do a cash deposit in which case, if they own property, going on to your mortgage as a guarantor is another option. The essential thing to understand is that you are using part of the equity in the guarantor's property as additional security for your loan. By using a guarantor the need for a 20% deposit is replaced with a 20% guarantee that is secured against the guarantor's property. We have written a one-page PDF (targeted at parents) explaining the different options that we can use and what it means to them. You can download it here: