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How a Family Guarantee Could Help You Buy Your First Home in WA
Getting into the property market can feel out of reach for many first home buyers in Western Australia – especially with rising property prices and the challenge of saving a 20% deposit. But did you know your parents or close family members might be able to help you get into your first home sooner, without handing over any cash?
A family guarantee (also known as a guarantor home loan) is one way to boost your borrowing power and avoid paying Lenders Mortgage Insurance (LMI), making it easier for many WA buyers to step onto the property ladder.
A family guarantee loan allows a close family member (usually a parent) to use the equity in their own property as additional security on your home loan. This means you can potentially borrow up to 100% of the purchase price, without needing a large deposit.
In most cases, the guarantee is limited to a portion of the loan – typically just enough to reduce your loan-to-value ratio (LVR) below 80%, which means you won’t have to pay LMI.
Let’s say you are buying your first home in WA for $500,000 but only have $25,000 saved – that’s a 5% deposit. On your own, you’d likely have to pay LMI because your deposit is under 20%.
But with a family guarantee, your parents could offer a limited guarantee using the equity in their own home – just enough to cover the shortfall between your deposit and the required 20%. This could save you thousands in LMI and help you qualify for a home loan sooner.
Key Benefits
While family guarantee loans offer real benefits, it’s important to understand the responsibilities involved – especially for the guarantor. If you are unable to meet your loan repayments, your guarantor may be liable for the guaranteed portion of the loan.
It’s a good idea for both parties to seek independent legal and financial advice before proceeding. Also, many lenders in WA offer the option to release the guarantee after a few years – once your property has gained value or you have repaid enough of the loan to reduce your LVR.
If you are a first home buyer in WA and have family willing to support you, a guarantor loan could make a big difference. It’s especially useful in areas like Perth, Mandurah, Bunbury and the South West, where prices have been rising and saving a full deposit can take years.
Speak to a local mortgage broker who understands the Western Australian property market. They can guide you through the process, assess your eligibility, and find lenders that offer flexible family guarantee options.
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