Wanted to talk about Family Pledge loans today as I am in the middle of helping some first home buyers purchase their first home via this method..
In todays world, young people often find it difficult to save up a deposit for their first home. Pressures of renting, daily living costs etc take precedent over saving.
One way this can be overcome is through use of a Family Pledge or Guarantor loan.
Typically a parent or close family member under certain circumstances will pledge their property to the lender as additional security to guarantee part of the borrower’s loan.
This gives the new borrower four key advantages,
- They have avoided the high cost of mortgage insurance.
- The borrower can significantly reduced the time to buy a property.
- They don’t need to save a deposit, though it is preferable to show some level of savings.
- Can borrow the whole purchase price of the property plus purchase costs such as stamp duty, borrower legals, application fees etc..
Family Pledge loans are not available in all circumstances. For instance, if the guarantor is retired and the property being offered to support the Family Pledge loan is their home and they few other assets, it is unlikely to be acceptable. The risks to the guarantor are too high. But, if they owned their own home and had an investment property to offer as security, this could be acceptable.
Property is not the only asset that can be used to support a Family Pledge loan. Cash deposited with the bank equal to the amount of the guaranteed loan, is also acceptable.
There are more options available form parents to support their children’s property ambitions. Please contact me for more information.
Leave a Reply