Why use family pledge?
Family pledge loans are available to purchasers who don’t have the necessary deposit to qualify for a home loan application. This product will allow you to borrow 100% of the property purchase price with the assistance of a close family member (guarantor) supporting your application.
- Your family member provides additional security to allow you to borrow more and has less of a deposit – a great option for children who have completed study and their income is expected to rise steadily
- Because you are using an additional security, the risk is slightly lower to the lender, and therefore, in most cases, the loan approval process is considerably easier
- You can avoid the mortgage insurance premium usually associated with loans over 80% LVR, saving you money
Features of a Family Pledge Loan
Generally, you will be eligible for the standard interest rates and product features. Our experienced finance brokers can explain the details and features of a family pledge loan in greater depth if you require their assistance, but first, consider this example.
Example of a Family Pledge Loan
John has been studying to be an accountant and has recently graduated from university. John’s income is low at present, but his family is confident that his income will continue to grow.
It has been difficult for John to save whilst he has been studying, and his parents have offered to assist him with his application by lending one of their homes for additional security on Johns new purchase loan. John can now borrow 20% plus costs, avoiding the needs for lenders mortgage insurance.
How do I release the additional security?
You will be able to release the family member’s security property once the balance is paid down or the value of your property increases in value – roughly 20% of the original purchase price