who can be a guarantor?

Hello everyone,

I would like to know if my god parent could be my guarantor to secure a bank loan to build a house.


cheers

I think anyone can be a guarantor as long as they're willing to sign off on it!

thank you

I wouldn't say anyone can be your guarantor. Every bank will have different policy on this and it really depends on the circumstances of your guarantor and the property involved.

To give you an example, if your god parent is a pensioner and pledges his or her principal place of residence it may not have the same appeal to the lender as if he or she is in full employment and the property being used for the guarantee is an investment purpose one.

This is of course for a security guarantee so you don't pay mortgage insurance and possibly pay no deposit. However rules are stricter if you are in need of a guarantor to repay your home loan, i.e. your income is not sufficient to support the home loan you are seeking. To properly qualify for a home loan requiring a guarantor, I would recommend finding an experienced mortgage broker in your local area.

I hope that helps.

Sorry, I didn't explain at all. Thlo's explanation is much better

That's OK annie.s What you said "willing to sign off on it" is still the key

As a mortgage broker this is what I do; arrange home loans 7 days a week.

thanx thlo you have answered my question..i m working with homeloans n my mortgage broker hasnt still found an answer to this question. my godparent is retired but has investments in shares n stuff and has a regular income. but yes he owns only one house.

Hi sveta, you are most welcome and also welcome to the forum

Arranging home loans with guarantors is not as straight forward as other home loans with a cash deposit. Though, home loans using a guarantor are becoming more popular in Sydney due to increasing Mortgage Insurance costs and the need to save a larger deposit.

i am in Perth. we only have 5% deposit and this includes FHOG + 5000 deposit to builder and 3000 deposit payed for land.

If you live in WA make sure you arrange your finance with someone who is a licensed finance broker in WA. Otherwise you won't have consumer protection.

my finance broker is from Home Loans Ltd

OK, Homeloans Ltd should be able to help you with the first type of guarantor (Security Guarantee). I am acrredited with Homeloans Ltd to offer their loans.

On this topic, thlo can you advise if it matters that the guarantor and you have different lenders?

And if it does, what normally happens?

From my understanding if your guarantor has a mortgage through another financial institution the banks will need to have a deed of priority created between them to see who gets access to the assets in what priority in the event of a loan default. Apparently this can add some time to the loan application.

And it will be near impossible to get approval. Because basically both banks will want to be first mortgagee - and of course only one can be. There would have to be massive amounts of equity for the banks to be happy.

what is the 2nd type of guarantor?

just to add on what everyones already said, you're loan will also need to be with the same bank as your garantor

Hi again fordehouse, I just need to clarify something first. Any information I give on this forum is general in nature and should not be considered advice. Advice specific to your circumstances should be obtained from your chosen lending manager or local mortgage broker.

If you are interested in obtaining a home loan from a bank using a guarantee security which is mortgaged to another bank, you need to ensure that your lender will accept a second mortgage for the guarantee. This is a great option as the guarantor (e.g. your parents) does not have to refinance their home loan to suit the applicant (e.g. you).

I have personally arranged in Sydney home loans using this structure and can say that it is very possible. Having said that if a second mortgage is involved your guarantors need to have a larger equity in their property (offered as guarantee).

I currently have a home loan customer in West Sydney who is going ahead with this structure as a result of my suggestion because refinancing my customer's parents to her choice in lender would have been costly for them and taken too long. (Banks are delaying the refinance of their customers to a new lender as they don't like to lose)

I have seen other mortgage brokers having a preference for refinancing the parents' home loan as well but this is not in the interests of the guarantor unless they wanted to refinance anyway. In my most recent case, my customer's parents had some extra facilities such as a margin lending loan and a line of credit loan using their home as security so it would have upset their life style too much to change and find replacement loan facilities for them with my customer's chosen bank lender.

I hope that helps (I think this is one of the most involved answers I have prepared here so far )

Hi sveta, the second type of guarantor I mentioned is involving the income of your guarantor to support your application for a home loan.

We use this in certain circumstances if the income of the applicants is not sufficient and there is a benefit to the guarantor (this is determined by the bank).

Thanks so much everyone (esp thlo).
The reality is that guarantor with a different lender is in a big too hard basket...we're changing lenders to accomodate this and therefore have the same lender.