The amount of money the bank will lend you increases significantly, with many home loan applicants borrowing as much as 105 percent of the purchase price of their home, which not only covers the cost of the home, but also stamp duty and other costs. The presence of a guarantor also eradicates LMI (Lenders Mortgage Insurance) for the home loan applicant, saving considerable costs. Loans are easier to approve, and the applicant will have access to the best available loan rates on the market.

While the benefits to both the bank and the home loan applicant are obvious, it is the guarantor who shoulders the risk to little reward. Occasionally, the lender will vet the guarantor’s employment status, preferring that they both have full-time or even part-time jobs, ensuring there is a steady flow of income.

In offering their own home for security in the home loan applicant’s new property, the guarantor still has no legal right to the new property should anything go awry. However, the guarantor can nominate how much of the loan they are prepared to guarantee, and at some stage during the loan the guarantor can ask to be released, which ceases their responsibility in the loan.

As the guarantor process can be quite delicate, and in some cases strain relationships, at Australian Capital Lending, we can make sure the guarantor has the right insurances in place to protect themselves. We understand the guarantor’s desire to plainly get their loved one into their first home sooner, but at our team of professionals, some of whom are guarantors themselves, recognise the guarantor deserves protection themselves.