All major lenders offer some form of equity guarantee whereby a parent (or relative) could offer their house or investment property as additional security to support their child to purchase a property.
This policy provides significant benefits for applicants who have excellent borrowing capacity but lack the savings contribution required to secure their ideal property.
Advantages
- It allows customers to purchase the property they want rather than having to settle for an inferior property.
- No mortgage insurance is applicable – saving thousands of $$$
- No minimum savings required.
- Parent’s exposure can be limited to the equity provided.
- Lenders can even take a 2nd mortgage over a parent’s property if parents have a home/investment loan with another lender.
- Offered across a broad range of lending products providing flexibility of loan choice.
- The guarantor can ask us to release them from the guarantee at anytime
An example
A professional young couple with exceptional borrowing capacity are first home buyers wishing to purchase their dream property for $500,000. They have $30,000 in limited savings and grants available. If the couple want to borrow $475,000, (‘loan to value’ ratio = 95%) they would incur a mortgage insurance premium over $14,000. If the family could pledge additional security of $95,000, the loan to value ratio reduces <80% and no mortgage insurance is payable saving the couple $14,000.
If you have any questions, call the lending team on (02)9266 2222.
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