Under this new loan, parents may use the equity they have in their own home as collateral for their children who want to take out a new mortgage.
“The Family Guarantee is a great option that makes a home loan more accessible for young people while also limiting the amount of exposure for their parents,” Heritage Bank CEO Peter Lock said. “Many parents are looking to help out but also have to be mindful of their own financial situation.”
Owner-occupiers and investors can avail of this new kind of loan.
The total amount of the new mortgage will be split between two loans. Part of it will be secured by the property of the parents who act as guarantors, while the other loan will be secured by the property being purchased.
This loan controls the amount that the parents are guarantors for. The Family Guarantee loan is also more affordable for borrowers who need not avail of Lenders Mortgage Insurance to secure the loan.
Individual circumstances of borrowers will still be taken into account before a new mortgage can be approved under the Family Guarantee.
“It can be tough for young people to get their foot in the door of the property market,“ Lock said. “We’d encourage anyone who is looking to help out a family member in buying a home to talk to our staff to see if the Family Guarantee is viable for them.”
Collections: Mortgage News