What is a family guarantee loan?

 

With property prices skyrocketing over the last few years, many parents have been asking the question of how they can help their children enter the property market.

Traditionally, the simplest way has been to provide cash gifts to help their kids with the deposit. From there, the children would obtain a loan in their own name for the remaining balance.

Over the last few years, there has been a rise in popularity of family guarantee loans, whereby parents use the equity in one of their properties rather than giving cash.

Family guarantee loans, sometimes also known as family pledge loans, allow the equity in the parents’ property to be used by the lender as security on a home loan. Unlike traditional guarantees where parents would take on the responsibility for their child’s entire loan, the guarantee can be limited to the portion equivalent to the amount they would have provided in cash.

By limiting this guarantee, parents aren’t necessarily guaranteeing the loan for the whole term. Once the child’s property has increased in value or once the loan has been reduced to a certain point, the parents’ property is no longer required as security and it can be released as a guarantee.

To find out if a family guarantee loan is right for your situation, it is important you seek the correct advice. Click here to make an enquiry or contact us on 1300 090 298.

Source: Chris Christie YBR