A guarantor home loan is a big commitment that requires consideration. As distinct from a normal home loan, an additional party is involved and it is essential that you ensure that your guarantor is not put at risk and your family relationships are not damaged by the arrangement.

It should be considered carefully to make sure that you don’t damage your family relationships or put your guarantor at risk.

So how do you know if a Guarantor Loan is right for you? We believe it is suitable if you meet the following criteria:

Can you get loan approval on your own?

We don’t normally advise people with a saved deposit to obtain a guarantor loan as it is usually better for them to apply for a loan on their own. You can talk to us to see if you qualify for a normal home loan.

Some people who qualify for a normal loan still choose to use the guarantor option in order to avoid expensive Lenders Mortgage Insurance (LMI). This is fine as long as you and the guarantors understand the risks and are happy with the arrangement.

Are you financially stable?

The guarantor is financially liable for some of your debt, and although this guarantee is in place you certainly do not want the bank to call on it! You should only seek the help of a guarantor if you are certain that your financial position is strong enough for you to meet the repayments and that you can comfortably repay the debt.

Ask yourself, what could you do if you lose your job? What would happen if you were to become ill, injured or pass away? If you are concerned about your stability then do not take on a guarantor loan. You can refer to our webpage about reducing the risk to the guarantor or for information on how to deal with any instabilities in your situation.

Is your relationship stable?

Using a guarantor is not suitable if you have an unstable relationship with your guarantor or the rest of your family. Family feuds can be escalated by having joint financial commitments.

In addition to this you should not use a guarantor loan to buy a house if you and your spouse have an unstable relationship. A divorce can be complicated if a guarantor’s property is tied in with the loan on your home. We recommend that before you buy a home you should discuss possible options in the event that you were to separate.

Do your guarantors understand the risk they are taking?

A guarantor loan is obviously not appropriate if the guarantor is not of sound mind, is not financially literate or is elderly. We recommend that all guarantors seek independent legal advice before entering into the guarantee arrangement.

Talk to a Mortgage Broker

Enquire online to talk to one of our specialist guarantor loan mortgage brokers. We’ll quickly work out which loans you can qualify for and if a guarantor loan is suitable for you.