Get your home sooner when a family member guarantees part of your home loan.
Family Pledge is a way for your parents or family to help you purchase a home without actually providing money for a deposit. Instead, your parents or family use their own home equity to provide additional security for a portion of your loan amount.
This solution reduces your Loan to Value Ratio (LVR) and can also save you a significant amount of money in Lender’s Mortgage Insurance (LMI). Lender’s Mortgage Insurance is generally payable on loans that exceed 80% of the value of the property.
Do your parents want to help you buy a home or invest in property?
How Family Pledge works
Your family members can use their own home’s equity to provide additional security for a portion of your loan amount. This solution reduces your loan to value ratio and can also save you a significant amount of money by reducing or even avoiding the need to pay Lender’s Mortgage Insurance. So you get into your home faster, with help from your family.
With the Family Pledge, the guarantee can be limited to a specific amount, which helps provide certainty and allows the property to be released earlier than guarantees which cover 100% of the loan amount.
By increasing your security through a guarantee from your family, you may be able to reduce or avoid paying Lender’s Mortgage Insurance. Lender’s Mortgage Insurance is generally payable on loans that exceed 80% of the value of the property.
Family Pledge can help you maximise the amount you can borrow so you can purchase the property you want. A guarantor can request to limit the guarantee to a specific amount.
Both the borrower or guarantor can ask us to release the guarantee (subject to approval) when the standard Loan to Value ratio (LVR) requirements are achieved.
There are no extra fees for the Family Pledge Option. Standard guarantee and legal fees will apply. The guarantor can be a new or existing Home Loan customer or even retain their home loan with their existing Home Loan provider.
John is planning to purchase a $300,000 property with a $15,000 deposit (LVR of 95%), which means Lenders Mortgage Insurance (LMI) would be payable.
If John’s parents were existing Bank Home Loan customers or had a freehold house and agreed to provide a family pledge guarantee of $56,500 as an additional security, the LVR would reduce to 80%.
This would result in the LMI premium requirement being waived, saving John up to $5,800.
You can use a Family Pledge to buy a home or invest in residential property, and you don’t have to be a first home buyer to be eligible
Family members who can provide the Family Pledge guarantee include parents, grandparents, siblings, sons and daughters. There is now the ability to do an Equity Guarantee which doesn’t require the equity provider to be a family member.
Family Pledge is not available for existing loans or refinances. Increases to loans with Family Pledge are allowed but the Family Pledge amount may not be increased.
Individual applicants are restricted to a maximum of one parental guarantee/family pledge borrowing.
No single guarantee is to represent more than 50% of the guarantor’s security.
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