The GHL Process
Buying a home and obtaining finance can be a daunting process, even if you've done it before. We take great pride in our service and aim to make the process as stress and hassle-free as possible. There are a few steps involved in the home loan journey and we will guide you through the whole process and beyond.
Here is a brief outline of what you can expect:
First chat
Here’s where you’ll get to chat with someone from our lovely team and we can find out your goals so that we can guide you on the next steps from there.
Document collection and calculations
So that we can provide you with information that is as helpful and accurate as possible, we will need you to provide a few documents (don't worry, we’ll outline the requirements clearly in an email to you). Using the information provided in your supporting documents, we’ll calculate your borrowing capacity across a number of different lenders.
Meeting
Here we’ll narrow in on the best way to achieve your goals and provide you with a comparison of lender options that are tailored to your needs.
Application
Once you have selected your preferred lender, we’ll prepare and submit an application on your behalf.
Approval to settlement
We’ll be in contact with the good news that your loan has been approved and will help you go through the loan contract documents. We’ll guide the application through to settlement and we’ll be around to help you with any other questions that you have once the settlement is completed.
...and beyond
Whether it’s in the first week of your new home loan or ten years down the track, we’re always more than happy to answer any questions and help in any way we can.
Why Use a Mortgage Broker?
Simply put, our job is to find you the right loan for your situation and make sure that you continue to have the right loan as your goals and situation change over time.
We can offer a range of options that you simply won’t get when you walk into a bank branch (if you can still find one!). Not just in terms of lowest interest rates, but also in taking into consideration lender-specific policies that may have a significant impact on your borrowing capacity.
Brokers are legislated to work in your best interests. Not those of the bank.
You'll have a professional available on an ongoing basis, to advise on anything to do with your lending needs.
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Family Guarantor Loans: A Pathway to Home Ownership Without a 20% Deposit
First home buyers often struggle getting into the market due to having low savings caused by high cost of living and higher property prices.
There are a range of ways in which parents or other family members can help borrowers, one of which is with a Family Guarantor loan structure.
What Is a Family Guarantor Loan and How Does It Work?
A Family Guarantor loan structure allows parents to assist without the need for a cash contribution. Rather, they allow a portion of the equity in their property to secure the new lending.
This benefits borrowers who have less than a 20% deposit for the purchase by avoiding the need for Lender’s Mortgage Insurance (LMI) fees. Family Guarantor loans often have lower rates than loans above 80% of the property's value.
How a Family Guarantor Loan Helps Avoid Lender’s Mortgage Insurance (LMI)
When banks lend money for a property purchase, the loan is secured by the property being purchased. When the amount borrowed is more than 80% of the property’s value, a Lender’s Mortgage Insurance fee is charged. This can amount to tens of thousands of dollars, depending on the property value and the amount borrowed.
A Family Guarantor loan avoids this. It lets the loan be structured so that most of it is secured by the property being purchased, up to 80% of its value. The remaining funds are secured by a guarantee against the parents' property.
Step-by-Step: Structuring a Family Guarantor Loan
Example 1:
Sam and Alex are purchasing a property valued at $750,000.
Stamp duty and other settlement costs amount to $45,000.
They have cash savings of $120,000 to contribute to the purchase.
This means that they need to borrow $675,000 to purchase the property.
The Loan to Value Ratio (LVR) is 90%. Therefore, a Lender’s Mortgage Insurance fee of up to $19,000 would apply.
A Family Guarantee would split the loan into two parts:
Part 1: Loan of $600,000 secured against the new property at a Loan to Value Ratio of 80%
Part 2: Loan of $ 75,000 secured by both the new property and their parents’ property
Example 2:
Sam and Alex are purchasing a property valued at $750,000.
Stamp duty and other settlement costs amount to $45,000.
They have no cash savings to contribute to the purchase.
This means that they need to borrow $795,000 to purchase the property.
They would generally not be able to borrow more than the value of the property so could not consider this purchase.
A Family Guarantee would split the loan into two parts:
Part 1: Loan of $600,000 secured against their new property at a Loan to Value Ratio of 80%
Part 2: Loan of $195,000 secured by both the new property and their parents’ property
Key Considerations for Borrowers and Guarantors
Although they are helping with the security, parents are not responsible for the loan repayments. The borrowers are entirely responsible for the repayments and must be able to demonstrate their capacity to service the loan.
The bank will undertake a full valuation of the parents’ property to ensure that there is enough equity for the guarantee. The total lending secured by the parents' property cannot usually exceed 70% of its value. This includes the guarantors' home loan and the new guarantee.
The new loan will usually be set up with a 30-year loan term. However, we aim to review the loan on a regular basis and arrange to have the guarantee removed as soon as possible. Once the two loans' total is at most 80% of the property's value, the security guarantee can be removed. Historically, we have found that this can occur in a timeframe of 4 to 5 years.
A security guarantee is often provided by parents. But, any close family members (e.g. siblings) can offer it.
The family member’s property must be in Australia and must have a freehold title (e.g. Torrens Title, Strata or Community Title).
What are the risks to the guarantors?
If the borrowers are unable to keep up with repayments on the loan, they may need to sell their home. If the property sells for less than the loan balance, the guarantor will be responsible for the debt.
A security guarantee uses equity in the parent’s property. This could affect the guarantors' other plans, like buying an investment property or using home equity for renovations.
Ready to explore if a Family Guarantor loan is the right solution for you?
Contact us today for a free consultation, and let’s discuss how we can help you achieve your home ownership goals!
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- All Rights Reserved
Goodrich Home Loans Pty Ltd (ACN 159 382 546) is authorised under LMG Broker Services Pty Ltd (ACN 632 405 504) Australian Credit Licence 517192
The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.
There may be occasions where you may be charged a fee by your broker.
Your broker is able to assess each lender's approval times and identify those that can provide approval quickly, however this is subject to change and can vary significantly based on how complex is your loan application and how quickly you’re able to provide the information we need.
Not all lenders are available to all brokers. The exact details of the lenders your broker has access to is disclosed within the Credit Guide your broker gives to you when providing credit assistance or is available upon request.
The way in which your broker will stay in touch with you will differ, however typically this will be via email. In addition you will be able to contact them for guidance as required. You are able to opt out of these communications at any stage.