Types Of Guarantees
Are you looking for a guarantor loan?
There is more than one type of guarantee that can be used with a home loan!
With so many options, it can often be difficult to find out which one is suitable for your needs.
Please read on to find out more about the types of guarantees that are available.
Choosing a guarantee
There are many things that must be carefully considered when you decide which guarantee will best serve your needs.
Often you will need to examine what assets you have available to support the loan.
This may include things like property, cash or someone’s income.
If your parents have agreed to assist you in obtaining a loan, they may offer their property as security.
Alternatively, they may agree give you a lump sum deposit or provide you with some of their surplus income to help you repay the loan.
The type of guarantee that you choose largely depends on both your situation and your guarantors.
Therefore, it is best to discuss all of the following options with your guarantor, before making a decision.
Main types of guarantees
Below is a list of the common types of guarantees:
- Security guarantee: this type of guarantee is where the guarantor offers their property as security for the borrowers loan. This is commonly undertaken by parents who are guaranteeing the loan of their son or daughter.
- Serviceability guarantee: under this type of guarantee, the guarantor pledges to use some of their income, to support the borrowers loan. This is often given by parents whose children do not have the funds to service their loan.
- Security and serviceability guarantee: this type is a combination of both the security and serviceability guarantee. Under this type, the guarantor offers their property as security for the loan and also offers to use their income to help the borrower meet their loan repayments.
- Family guarantee: this guarantee type can be either security of serviceability, however this can only be given by a family member.
- Parental guarantee: this is where a parent guarantees the loan of their child, either by using their property as security for their child’s loan, or through a serviceability guarantee.
- Limited guarantee: under this guarantee type, the guarantor’s liability is limited to only a part of the home loan, and not the full loan amount.
- Debt consolidation guarantee: this is where the home loan taken out by the borrower, is paying off all of their consumer debts. So under this loan type, the home loan is guaranteeing the repayment of the other loans.
- Term deposit guarantee: also called a cash guarantee, this is where the borrowers loan is being secured by a sum of cash, rather than by property.
Which banks can help?
Most banks have a variety of guarantor loan products available to them, so it is really a matter of working out which type suits your needs.
There are also some lenders that specialise in certain guarantee types.
We recommend that you speak to our mortgage brokers on 1300 399 056 or enquire online.
We can help you figure out which bank will offer you the most competitive loan package.
What should I ask my guarantor?
With so many guarantee options to choose from, you should consider the following questions:
- What is your relationship to the guarantor?
- Do they own a property?
- Does their property have an existing mortgage?
- Do they have any surplus income?
- Do they have a lump sum deposit amount?
Talk to us to find out more
We are specialists in guarantor supported lending and can quickly work out which guarantee is appropriate for your situation.
It may that a security guarantee better meets your needs, or maybe you are able to use your a portion of your parent’s income to guarantee your loan repayments.
Whichever guarantee you require, we can help find a bank that will lend to you!
Please call us on 1300 399 056 or enquire online to discuss your situation with one of our mortgage brokers.