Do you need extra income to demonstrate your ability to repay your home loan? Why not apply for a serviceability guarantee!

This way, you will still get approval for a home loan, but without risking the assets of your guarantor.

To find out who is eligible to apply for this loan, please read on.

Can I apply for this guarantee?

Whilst a serviceability guarantee was formerly a popular product for borrowers who could not afford their loan repayments, its availability is now restricted to a few limited circumstances.

Banks no longer allow a serviceability guarantee on its own. It must be used in conjunction with a security guarantee.

Lending policy is relatively restrictive and is this type of guarantee is only offered by a couple of lenders.

However, you may fall under a situation that makes you eligible to get approval for this guarantee type. Please read on for more general information.

Helping out a family member

It is quite common for family members to help each other out with their commitments and with financial burdens.

This is generally the case with parents whose children are not yet reached financial independence. Often, they will need monetary assistance to pay for certain living expenses, buy necessary items such as furniture or cars, or help them repay their loan.

A serviceability loan can formalise this arrangement and make it acceptable to a lender.

With the added support of the guarantee from the parents, the lenders do not view the borrowers loan as high risk and can approve the amount.

Student borrowers

If you are a student that does not have a large or regular income, your parents may be able to assist you with your loan repayments.

However, they will also need to provide their property as additional security for the loan.

This is know as a security guarantee and is quite popular with borrowers that have a small income.

Borrowers applying for this loan must be aware of the risks involved in this arrangement.

Where both the borrower and guarantor are financially responsible, it can be quite a beneficial arrangement. Banks will usually lend 100% of the purchase price!

Expensive Lenders Mortgage Insurance (LMI) is not applicable either. This could save you thousands of dollars!

To find out which bank offers the best guarantor loan for your situation, please enquire online or contact us on 1300 399 059.

Spouses

Often successful business people or professionals will buy a property in the name of their partner.

This is primarily because, if legal action is commenced against them, the property will be protected.

However the spouse may be a stay at home parent or may have a much lower income, making it difficult for the couple to buy an expensive home.

Luckily, some lenders will still include the spouse that holds beneficial interest in the property, despite the fact that they are not the legal owner and hold no title.

This effectively means that both of their incomes can be considered when assessing the loan, making it easier for the couple to get approval.

Guarantee from a director of a company

Some banks will consider approving a serviceability guarantee loan for a director of a company that guarantees a loan in the name of their company.

This arrangement is typically used when a shelf company buys a property. In this case, the directors income can be used to service the debt.

However, most situations will be assessed on a case by case basis.

Guarantee from the director of the trustee company

Are you the director of a trustee company or the beneficiaries of a trust? If your trust is looking to purchase an investment property, you may be able to guarantee that loan.

Generally, the lender asks for a guarantee from the directors of the trustee company (or trustee if it is an individual). However, some lenders also require an additional guarantee from the beneficiaries.

These loans can be quite complicated, so it is best to speak to one of our expert mortgage brokers on 1300 399 056 or enquire online.

We can contact you to discuss your eligibility to apply for a serviceability loan. Speak to us today!

What is a serviceability guarantee?

A serviceability guarantee is a type of guarantee where the guarantor is pledging to use their surplus income to help the borrower to make their repayments.

Without the serviceability guarantee, the borrowers income would fall short of that required to comfortably afford their mortgage repayments.

With the help of the extra income from their guarantor, the borrowers are able to demonstrate to the bank that they can repay the loan.

What do the banks require?

Generally,the guarantor will need to sign a form confirming that they are aware that the borrower cannot meet the loan repayments on their own and that they will be required to make repayments.

They must also provide income evidence, such as two recent payslips.

Additionally, the guarantor must be in a good financial position and be able to afford both their current debts and their share of the repayments on the new loan.

In most cases, they will also have to provide their home as additional security for the loan.

Speak to our specialist team today!

Are you looking to apply for a serviceability guarantee, but are not sure if you qualify? Please call us on 1300 399 056 or enquire online. We can find out which banks will accept your situation. Get in touch with us today!