Are you in need of extra revenue to show your ability on loan repayment. Apply for a serviceability guarantee. With this type of guarantee, you will be approved for a home loan without putting your guarantor’s assets at risk.
Can I apply for this guarantee?
Serviceability guarantee was once popular for borrowers who were not able to afford their loan repayments. It is of late restricted few circumstances. A serviceability guarantee is not allowed on its own but in combination by with a security guarantee. The policy of lending by most banks is restrictive and only a couple of lenders can offer this type of guarantee. However, you may be eligible for an approval on this type of loan under certain conditions.
Helping out a family member
Family members can offer assistance to each other financially. Which the case with parents whose kids are not financially independence. They help their children to pay for certain expenses or even help them in loan repayment. With a guarantee from the parents, banks do not view this loan risky and, therefore, can approve it.
A student who does not have regular income may get help from their parents when repaying the loan. However, a property is provided as security for the loan. It is known as a security guarantee. When borrowing this kind of loan, you should be aware of the risk involved. When both the borrower and the guarantor are financially stable, the arrangement can be quite beneficial. The Lenders Mortgage Insurance (LMI) is also not applicable saving you a lot of money.
Business people and professionals often purchase properties and register with the name of their partner. Certainly because the property is protected even when legal action is taken against them. It may not be easy for the couple to buy expensive properties as the spouse may have little income. However, banks may still include spouses holding beneficial interest on the property even though they are not the owners of the property. This is because the banks may consider both of their income when assessing the loan.
Guarantee from a director of a company
Lenders may approve a serviceability guarantee to a company director guaranteeing a loan in the name of the company. This can be considered when a shelf company is purchasing a property. The director’s income will be used to finance the debt.
The director of the trustee company
A director of a trustee company can guarantee a loan when the trust is looking to buy a property for investment. Here the bank will ask the directors of the trustee for a guarantee. Some of the lenders may require some additional quarantine from the beneficiaries.
What is a serviceability guarantee?
This is where guarantors pledge to use their surplus revenue to assist the borrower in loan repayments. The borrower’s income may not be able to finance the mortgage repayments without having a serviceability guarantee. Getting help from the guarantor will prove that you can service the loan.
What do the banks require?
The guarantor will sign a form that confirms the borrower cannot repay the loan on their own and that they will be needed to make the repayments. Payslips are also required to act as income evidence. The guarantor also needs to be financially stable to finance repayments. Mostly, they will provide their homes as security for the loan.