Family equity, family pledge or, more commonly, a limited guarantor loan, allows a family member usually your parents to guarantee a portion of your home loan.
If you’re a first home buyer saving for a deposit can be difficult. Using the equity in a family members existing property can help you buy a home or invest in residential property sooner – and the best part is they don’t need to actually provide you with any cash.
- Limited liability guarantor: your family member offers their property as security for part of your home loan, usually around 20 per cent. Good for reducing extra costs such as Lenders Mortgage Insurance (LMI). Benefits of family equity loans:
- You may be able to buy your home sooner
- Avoid paying Lenders Mortgage Insurance (LMI)
- Maximise the amount you can borrow
- Guarantors can be parents, parents-in-law or step parents (grandparents and siblings will also be considered)
- Guarantors can determine what portion of the loan they will secure Family equity is generally a feature and not an actual type of home loan. You can usually add the feature to any regular home loan (and take it away as well, when you don’t need it anymore).