We understand the importance of family support when it comes to purchasing a home. If your parents are willing to help but aren’t able to provide cash for your deposit, they can utilize their own property as security. Here’s how it works:
Parental Guarantor
Instead of contributing cash, your parents can use their property as collateral for your deposit. They must have sufficient available equity to cover 20% of their mortgage while keeping the remaining amount below 80% of their property’s value. It’s important for your parents to be in a strong financial position and currently employed (not retired).
Cross-Guarantee
When your parents agree to be guarantors, you’ll need to have your loan with the same bank where their property is mortgaged. This arrangement is known as a cross-guarantee.
Understanding Bank Policies
Each bank has its own approach to handling guarantees. Our team can assist you and your parents by providing guidance and explaining the specific process followed by different banks.
It’s crucial to recognize that being a guarantor involves significant responsibility and potential risks. If you default on your loan repayments, your parents will be liable for repaying the debt on the guaranteed portion (e.g., 20% of the loan). In some cases, the property used as additional security may need to be sold to settle the outstanding debt.
To protect everyone involved, we strongly advise parents to seek independent legal advice before committing to becoming guarantors. This ensures they fully understand their rights, obligations, and the potential consequences.
Contact us today to discuss the guarantor option further and get expert advice throughout the process. We’re here to support you and your family in making informed decisions that align with your financial goals.
