Family Pledge Home Loan

2011 February 28

What is a Family Pledge Home Loan?

Have you heard of a guarantor home loan? A family pledge home loan is basically a type of guarantor loan where your family supports your application to purchase property. They can do this in three different ways;

  • Equity support  – Using real estate they own as security for your loan
  • Income support- Income not property is used as security for your loan
  • A combination of BOTH equity and income support

Depending on the lender, a guarantor loan has a number of different names. These in include the family guarantee, family support, family equity and fast track loans. In fact St George calls its guarantor loan the St George Family Pledge Home Loan!

This can make it rather confusing so using a mortgage broker specialising in guarantor loans such as the Family Pledge Home Loan is a must.

Equity Support in More Detail

Using equity in the home is the most common form of security used for guarantor loans such as the Family Pledge style loan. Many guarantors do not use their own home as security either. Other types of property security such as investment properties are perfectly acceptable.

You can avoid Lenders Mortgage Insurance (LMI) and save money! Banks such as St George believe there is a greater chance they will lose money if they loan more than 80% of the property value. This is where you have to pay an insurance fee called Lenders Mortgage Insurance (LMI).However with equity support the guarantor takes on this liability.

Basically a Family Pledge Home Loan Means that the lenders do not have to shoulder the liability of loans greater than 80% and therefore you don’t have to pay LMI.

No deposit home loans have also been removed from the market. Therefore if you want to borrow 100% of the purchase price or more, Family Pledge Home Loans have become the only way to get approval.

You must be careful when using a guarantor who still has their own loan repayments for their property. There must still be enough equity owned by the guarantor to cover the liability.

Income Support in More Detail

Income support is less common and happens in different circumstances. Those who would normally be unable to service a loan may be able to find approval from lenders using this income guarantee. It is normally used when your income is low and expected to rise in a fairly short period of time. For example just before a promotion or during a probationary period of employment.

Income support is usually determined on a case by case basis and not all lenders will consider this type of guarantor. If you want to borrow more than 80% of the property value you must also combine income support with equity support.

So what are benefits of having a Guarantor?

  • Most importantly you are far more likely to get approval!
  • You can reduce the risk of your guarantor with a limited guarantee (see below).
  • Buy your property without having a despite saved.
  • You can borrow more. Up to and beyond 100% of the purchase price.
  • You do not have to pay Lenders Mortgage Insurance (LMI). Thousands of dollars can be saved!
  • Basic loan discounts and professions packages can be the same.

To find out more about a limited guarantee before you talk to a specialist mortgage broker.

The Home Loan Experts have created a comprehensive Guide to Guarantor Loans, and are experts at gaining approval for Family Pledge Home Loans. You can also use their Guarantor Loan Calculator for a basic idea of your approval chances and limited guarantee.

You can damage your credit score every time you are declined a loan application. Prevent this by applying with the right lender the first time by talking to a mortgage broker specialising in these loans such as the Home Loan Experts.

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