Gift Of A Guarantor

It’s no secret that house prices on the Northern Beaches mean they are out of the price range for most first time buyers. But financial consultant Troy Green says family, and even friends, can help make a first home dream a reality.

Soaring house prices make it difficult for many first time buyers on the peninsula to realise the dream of owning their own home.

However, there are ways that parents, grandparents, brothers, aunts, uncles and even friends can help without actually being out of pocket.

Family members can gift a deposit, or part thereof, to help first home buyers secure a loan. Everyone must be clear about the arrangements and that includes the lender.

“If it’s too hard to save a deposit but you can service the debt, then you can ask your parents or another family member for a ‘gift’”, explains Troy Green, founder of AdGreen.

Another way to assist is for family to use the equity in their own home to give added security to the lender by acting as a security guarantor.

This can have a number of benefits. It means you may actually have to borrow less and it can reduce or even remove the need for Lender’s Mortgage Insurance (LMI).

Troy explains, “They can save $40,000 upwards in LMI fees on a median property price of $1.15m.

“If the borrowers work hard at paying off the loan and there is some organic growth, the first home buyer can release the limited guarantee and set the security guarantor free within two to four years.

“It is all about investing in family and their future, guarantors can help first home buyers get into their dream home faster and avoid the extra fees.”

CASE STUDY- Scott Jeddison

  • His Mum helped him buy a property with a purchase price of $510,000 in Sydney back in 2012 by using the family home as security. 
  • The mother provided a limited guarantee of 20% of the purchase price, or $102,000.
  • In 2016 Scott’s place is worth $800,000 and he had repaid some of the loan. We then discharged his mother’s limited guarantee. 

Troy Green
Level 2, 22 Darley Road Manly
1300 788 101   |   +61 412 381 960