It can be overwhelming for first home buyers to save for a deposit, but there is a way to make this more achievable with the assistance of those closest to you.
With a Parental Guarantee, first time borrowers can enjoy:
With high property prices it can be overwhelming for first home buyers to save for a deposit. However, there is a way to make this more achievable with the assistance of those closest to you.
Laura is a first home buyer and has found a property that she wishes to buy for $700,000. She can afford to make repayments on a loan of $700,000 but doesn’t have enough funds for the 20% deposit. Laura’s parents are happy to assist her in entering the property market and have enough equity to use as security against their current property. Laura’s parents offer 15% equity by way of security of the $700,000 purchase price from their own property, which when added to her 5% deposit, enables the purchase to proceed without the need for Lenders Mortgage Insurance.
This may result in a huge saving for Laura as Lenders Mortgage Insurance can be an expensive extra. In this scenario, $105,000 has been secured against her parent’s property, and the property being purchased. There are two loans in Laura’s name.
*Stamp duty costs may apply and vary depending upon the state the property is in.
If you decide to use cash rather than your property’s equity, that amount can be placed into a Unity Bank Term Deposit as a guarantee to assist your child in entering the property market sooner.
The applicable rate for the term deposit account is the standard advertised rate. Interest on the account will be paid monthly or annually on deposits from $1,000. The term deposit can hold funds exceeding the 20% deposit, however, the amount to be used as a security for the Guarantee will depend on the Loan to Value Ratio.
The Term Deposit will continue to roll over after the initial term investment is made, until the required Loan to Value Ratio is accomplished. The guarantor must seek mandatory legal advice before moving forward with the loan guarantee.
Greater options & Greater flexibility
Parents thinking of becoming guarantors for their child must know the risks before taking steps to assist their child in entering the property market:
"We were very pleased with the speed and personalised service we received from the team at Unity Bank in helping us purchase our first home. We also found their products to be very competitive. Unity Bank has more of a family feel to it than a corporation. We have already recommended them to others, as we are very happy with them."
Emanuel, Member
4 The Parental Guarantee is only offered through our First Home Buyer Advantage Plus Loan for the purchase of owner-occupied properties. Please note: the guarantee is not available for the purposes of owner builder construction, cash out, debt consolidation or addition of the security to an existing home loan. Minimum home loan balance $150,000. Not available for top-ups or internal product switches. Maximum loan period 30 years. Interest rate calculated daily charged monthly. After fixed period interest rate reverts to First Home Buyer Advantage Plus standard variable rate. Please note the borrower (child) must contribute a 5% deposit consisting of genuine savings.
Guarantors should consider the risks associated with the Parental Guarantee, predominantly that if the borrower defaults on their loan, the guarantor is liable to pay up to the maximum portion of the security they have guaranteed. You must seek independent legal advice before offering to guarantee a loan.
5 Eligibility criteria, terms and conditions, fees and charges may apply. All information is subject to change. For standard terms that are less than or equal to 12 months, interest is paid at maturity; for terms over 12 months, interest is paid annually and at maturity. For monthly terms, interest is paid every month and at maturity with a reduction of 0.20% from the applicable stated interest rate. The Term Deposit can hold funds exceeding the maximum 20% of the guaranteed loan value, however the amount secured against the loan will be determined by the Loan to Value Ratio. After the initial term is met, the Term Deposit will continue to roll over until the required Loan to Value Ratio is met, and the guarantee can be released. Once the home loan settlement is finalised, the Term Deposit will be secured against the property that has been purchased. The Guarantee must be released prior to accessing any of the principal deposit. Once the Guarantee is released, an interest rate adjustment will normally apply. Please note: Members are not entitled to withdraw funds until the term matures. We may, in our absolute discretion and consideration of their reason, allow the Guarantor to withdraw funds before the end of the term.
* Eligibility criteria terms and conditions apply to our Unity Bank Products and scheme eligibility applies to the Government Schemes. Fees & charges may apply. Any general advice or information on this podcast does not take into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you. Please review our Disclosure Documents before acquiring any product. For full information on these options go to www.unitybank.com.au/home-loans/affordable-home-pathways/explore-our-home-pathways/. Unity Bank Limited. ABN 11 087 650 315. AFSL/Australian Credit Licence 240399
Information above has been prepared without taking into account of your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness, having regard to your objectives, financial situation and needs. You should obtain and consider the Product Disclosure statement here.
Credit eligibility criteria, terms and conditions, fees and charges apply. All information including interest rate is subject to change.
