Guarantor loans
Because most lenders will not release funds for transportable homes, prefabricated homes, factory built homes, removal homes and relocated homes prior to the completion of the house many people have been unable to take advantage of the unique benefits of these methods of construction.
By using a guarantor you can borrow the full cost of the land as well as any construction costs and have the funds released before the property is complete! Best of all it is usually at normal home loan rates!
How does it work?
The borrower obtains a loan using both their land and the guarantor’s house as security. The amount of the guarantee can be limited to reduce the risk to the guarantor. Funds can be released prior to the house being complete and on site. If you choose you can apply to remove the guarantee when the house is complete subject to the lenders approval.
What if I’m not building a transportable home?
If you are buying a standard home or are building a normal site built home then you may want to refer to our partner business the Home Loan Experts and their page on Guarantor loans for more information. Guarantor loans are commonly used by many first home buyers so that they can enter the property market with little or no deposit.
An example
John is a first home buyer who has a great income and no savings. He would like to buy a block of land and build a transportable home so that he can get his new home sooner for a cheaper price.
Land purchase price: $200,000
Construction cost: $150,000
Other costs: $5,000
TOTAL COST: $355,000
John needs to borrow $355,000 but only has security worth $200,000. Luckily his parents are happy to guarantee his loan, so we are able to lend John the full $355,000 and release funds before the house is complete and on site. When John’s house is complete we can then revalue his home and release the guarantee, so he is no longer relying on his parents.
Who this loan is for?
Owner occupiers, investors, purchases, refinances, construction. All types of transportable homes are usually acceptable including removal homes or second hand dwellings being relocated.
Who this loan is not for?
Low doc & pensioners using their home for the guarantee. Pensioners using an investment property or people who are not pensioners using their own home are acceptable.
Type of lender
Major bank.
Type of loan
Typically this loan is available with both basic and professional pack discounts. In most cases we can get you a similar interest rate to those offered by the major banks!
Maximum loan amount:
$1,000,000
Maximum % of property value (LVR):
80% of the total value of the land plus the guarantors property less any loan owing on the guarantors property. This amount can be more than 100% of the total cost of the land plus all construction costs.
Maximum loan term
30 years.
Frequency of payments
Weekly, fortnightly or monthly.
Interest only option
Available, maximum of five years. Interest only payments must be made monthly.
Redraw
Yes, a fee may apply.
Fixed rate option
Yes, up to 5 years available. Note that we recommend you should only fix part of your loan so that you can redraw the progress payments as you need them from the variable portion.
100% offset account
Available on some loans.
Lender Mortgage Insurance (LMI)
Not applicable for guarantor loans. If you request the lender to remove the guarantee once the house is complete they will revalue the property and subject to approval may ask you to pay an LMI premium if the loan amount is greater than 80% of the property value.
Removing the guarantee
The lender will not automatically remove the guarantee. The guarantee is only removed at the request of the borrower. The loan is reassessed and if it meets the lender guidelines then the guarantee can be removed. Primarily your repayments must have been on time, the house must be complete and deemed to be a permanent structure by the bank’s valuer. The lender reserves the right not to remove the guarantee should the loan not meet their guidelines.
Legal Advice
We strongly recommend that all guarantors obtain independent legal advice before entering into a guarantor arrangement. Some lenders may require this as a condition of the loan.
Notes
The details above are for the most commonly used guarantor loans from one of our lenders. The details of your loan may differ slightly, please refer to your loan offer for the full & correct details of your loan. The loan may take up to six weeks to be advanced if your situation is complex so please apply for the loan well in advance of entering into a building contract or agreement to purchase a removal home.
Guarantor loans for other property types
If you are not building a transportable home then you may want to refer to our other website for information about guarantor home loans for first home buyers or those with no deposit.
Where to from here?
- Take a look at our Frequently Asked Questions (FAQ).
- See if you meet our Lender Guidelines.
- Read about our popular equity loans.
- Send us your full details to get an obligation free quote.