You Can Buy with a Little Help From Your Family
13 November 2020
So you want to build your dream home at Riverhills but you have less than 20% of the loan amount saved for the deposit. In all probability, your mortgage lender will make you take out Lenders Mortgage Insurance (LMI) to cover the deposit shortfall, and that can be a hefty cost.
But if you have a family member with enough equity in their home, and who trusts that you won’t default on your eventual mortgage repayments, there might be another way.
That family member can provide a Family Security Guarantee. They don’t need to pay any cash. It’s simply a way of accessing the equity in their home and using it as security against your deposit shortfall.
For example, if you wanted to borrow $500,000 to buy a home but only had $25,000 saved, the Family Security Guarantee would need to cover $75,000 to boost you up to that magical 20% deposit (20% of $500,000 is $100,000).
What it means is, with a family guarantor you can potentially buy a home with less deposit than you thought you needed, and without LMI.
Of course, not everyone has a family member with enough equity in their home to help. And not every family member is willing to take the risk, because, in the worst-case scenario where you end up defaulting on your loan, they could lose their home.
But right now is a great time to buy. Because if you’re eligible for the government’s $25,000 HomeBuilder Grant and the $10,000 First Home Owner Grant, as well as the First Home Loan Deposit Scheme, you really don’t need wealthy relatives to help you out.