Being a guarantor for a loan
Many families like the idea of helping out the kids get their first home but there are things you should know before going ahead.
Most people become guarantors for family members by providing extra security (property) to the lender to guarantee the loan for their relative. By providing the extra security the loan amount versus the total security amount means that the Loan to Value Ratio (LVR) is reduced, typically below 80%. This means that no Lenders Mortgage Insurance (LMI) is required and no added cost.
You should be aware that there can be consequences by "going guarantor" for a family member and it is strongly recommended that you seek independent legal advice before taking the plunge.
See ASIC's Money Smart website for a insight into what is involveded in being a guarantor for a family member or friend, click here.