A term deposit guarantee or a cash guarantee is a type of guarantor home loan where the guarantor provides money as security for the bank rather than their home. This is an uncommon type of security guarantee, as it is used when the borrower is looking to borrow close to 100% of the purchase price.

Why use money instead of a property?

Many guarantors prefer not to risk their property when helping their son or daughter to buy a property. As a result a few lenders now allow guarantors to provide money as security rather than property.

The main advantage is that the guarantors property is secure in the event that repayment cannot be made. Additionally, you can sell your property or mortgage your property without affecting the guarantee.

How does it work?

The guarantors put their funds into a term deposit with the lender that the borrowers are using. The bank will then hold onto the term deposit and keep rolling it over until the guarantee is removed. If the funds are required then you can move the guarantee onto a property with minimal hassles and the funds will then be released.

Will I still earn interest?

Yes, the bank will continue to pay you interest from the funds in your term deposit. However, as you cannot change banks, you will have to accept whatever rate of interest they offer you when the term deposit rolls over.

Find out more…

Contact us and one of our mortgage brokers will work out if this style of guarantee is suitable for you.