Dec 10, 2016

You can look at it as a no deposit home loan because you can have a family member to go guarantor on part of their home loan by using the equity in the family home as a guarantee, without them actually providing the cash for a deposit.

Family Pledge allows parents and some other family members to use their own home's equity to provide additional security for a portion of the loan amount. This solution is particularly useful for first home buyers as it reduces the loan to value ratio and can also save you a significant amount of money by avoiding the need to pay Lender's Mortgage Insurance.

The Family Pledge product allows the guarantee to be limited to a specific amount, which helps provide certainty and allows the property to be released earlier than guarantees which cover 100% of the loan amount. In the past, when parents would go guarantor on the loan, it would mean that they were on the title and the mortgage as well. This is no longer the case.

Is A Family Pledge Worth It For You?

Here are some of the pros and cons to this type of loan:

Pros:

  • You don't actually need to hand over any cash
  • Relieves your guarantor of full responsibility
  • Your bank is more likely to approve your loan
  • Avoid mortgage insurance
  • Still eligible for financial assistance
  • Get moved into your new home faster

Cons:

  • Putting your family's (guarantors') home at risk
  • Not all banks offer family pledge loans
  • Tempting to jump into it based on guarantors' knowledge and help

Avoid some of the biggest traps associated with family pledge loans and seek expert advice!

What Next

So if this sounds like something that could be helpful to you, contact Calder Finance Broking now on 08 8373 3333 and speak to our lending experts about how we can help you get into your first home faster.

Written and Supplied by Cliff O’Connell of Calder Finance Broking. For more information please visit Calder Finance. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237