Saving for your first home can be a huge hurdle for some first home buyers, who may not have even heard of a family pledge loan. If you are trying to save a deposit for your first home whilst paying rent to your landlord, it can seem like a mammoth task.
To make matters worse, by the time you save what you thought was enough, the goal posts could have moved as property prices increase and you have to keep saving to catch up with the market.
Even though the First Home Buyer Scheme has ended in Queensland there are always alternatives and opportunities to get a foothold in the property market.
If you are lucky enough to have a close family member who is willing to help you get on the first step of the property ladder, a family pledge loan could be right for you.
The family guarantee loan allows a family member to pledge or guarantee part of the equity from their property towards a deposit on your purchase. The family member, quite often mum or dad, will allow the lender to take a mortgage over their property to support this guarantee.
Borrow 100% or more with a family pledge loan
In return, the lender will allow you to borrow 100% of the property price plus associated costs, secured by both the property you are acquiring and your family member’s property.
Usually the guarantee will be 20% of the purchase price to enable the borrower to avoid paying lenders mortgage insurance. As time goes on and you reduce the balance of the original loan, or when the value of the property increases, the guarantee is removed and your loan will ‘stand alone’.
There are implications of this product for the guarantor and legal advice should always be sought before entering any such agreement. However if both parties are happy to proceed it can be an immediate goal scoring opportunity for a first home buyer.
If you are thinking about applying for a family pledge loan, please give us a call as we would be happy to have a chat to you about your plans.