The discourse surrounding gaining access to the property market often focuses on negativity, particularly amid a media era that successfully drives readership through encoded scepticism (smashed avocado anyone?). Consequently, avid savers are commonly unaware of the financial benefits of obtaining a security guarantor home loan, often overlooking this as a viable pathway into property ownership.
There is a lot of industry talk about property prices decreasing in the coming years – economists have predicted such, and this could well be the case in the face of a market saturated with inner-city apartments outweighing their generated demand. But in spite of some inevitable fluctuation, history shows a steady continuance in property value increases, whether that’s looking at the trajectory from the past fifty years or trends from the last decade.
Further, even in periods of decline, the outer suburbs often remain quite stable, retaining the age-old logic that it is always better to get into the market sooner rather than later. And really, if you have someone that can be your guarantor, then why wouldn’t you?
To assist, we’ve summed up some important need-to-knows about the benefits of security guarantor home loans:
Guarantors Aren’t Always Parents
While parents often fulfil the role of guarantor, it isn’t always the case. Some borrowers have sought a guarantee from aunties, uncles, or grandparents, depending on the lender’s aptitude. If your chosen relative’s equity can guarantee twenty percent of your loan, you are in with a fighting chance.
Avoid Hefty Mortgage Insurance Fees
Having a guarantor also means cutting out Lender’s Mortgage Insurance (LMI). The loan-to-value (LVR) ratio over 80% (typically borrowers without a guarantor) triggers the LMI, resulting in an additional expense. The LVR ratio under 80% (feasible for guarantor home loan borrowers) doesn’t trigger the LMI – this is a huge sum saved by the guarantor home loan borrower.
Wider Scope In Property Type
Those who borrow without a security guarantor often rely on incentives such as the First Home Owner’s Grant; however, this limits the borrower’s search to brand new properties only. Having a guarantor gives you more options and allows you to widen your scope, which is great news for those seeking a slightly older home with a little more character.
Potential For Better Interest Rates
The best part? A guarantor means you are borrowing less than 80%, which puts you in a better position as far as interest rates and products available. That’s more money in your back pocket, and/or a home loan paid off quicker.
Have you got questions about borrowing with a security guarantor? Call us today on 1300 693 973.