Guarantor Information For Refinancing

A guarantor is a person who owns a property and is willing to guarantee your home loan deposit. The guarantor uses his or her property to provide security for a part or all of your loan.

Some lenders may limit their guarantor options to parents or relatives. Other lenders may look at criteria such as the guarantor’s finances, credit history, citizenship status and age before accepting the security.

If you have little or no deposit, guarantors can help you get into the property market sooner. They can also help you avoid Lenders Mortgage Insurance (LMI) and access more competitive rates.

But they also involve risks. If you cannot make a mortgage repayment, your guarantor’s property may be at risk or the guarantor may be liable to cover your outstanding repayments.

Refinancing a loan that serves as a guarantee . . .

Before you sign on as a guarantor, you should think about your future plans for your property and the effect that providing a guarantee may have on those plans. One reason for this is that you may not be able to sell or refinance your home during the time that you’re providing the guarantee.

Guarantors should always seek professional advice before they decide to become a guarantor, so they can be sure it’s right for their situation. Australian Brokers will be able to guide them through refinancing as a guarantor.

When you refinance a loan that has a guarantor, you will be responsible for making the monthly payments on time.

When you have a guarantor on your loan, you may be able to refinance to a new home loan with the existing guarantor or a new one.

When you meet the lender’s eligibility criteria, you will be eligible for the loan. Doing your research before committing to a loan agreement is always a good idea.

If you are looking to refinance a home loan, some lenders may prefer that you have at least 20% equity built up in your home. If you are unable to provide this amount, you will likely be asked to pay Lender’s Mortgage Insurance (LMI) on your newly refinanced home loan.