I’m trying to help one of my kids buy their first home and want to get some advice on the options available. Can I just be a guarantor or do I have to be on the loan with them and what else do I need to consider?

Hi Peter, it depends how you define 'help' & the reason you are helping, ie. if they don't have a deposit but has enough income to service the loan, you can just be a guarantor but that would mean giving a mortgage over a house that you own until they paid the loan to the required level or the value of the house went up to achieve the same outcome. Otherwise if they don't have enough income to service the loan, you may need to be joint borrower/owner, although banks don't really prefer that option as there are various consumer credit codes which need to be complied with & that also mean you need to get a legitimate benefit from the transaction. Often the easiest & cleanest way it if you give them an interest free loan - if you have the cash - to get them to where they need to be. Cheers.....

Hi Peter,

You can guarantee your son on your property by giving him a limited guarantee by putting your property as security. Your guarantee is limited to 20% of his purchase price.
He will be able to borrow 100% on his property without having to pay deposit or mortgage insurance.

Hope that helps.

Thank you

Peter. Good evening. Thank you for your question. Just to clarify with information already provided, you can assist your Son with a Family Guarantee that would cover any shortfall he may have in the deposit.
From the loan servicing perspective, your Son has to be able to demonstrate that he can afford the loan, by passing the Lenders income test.
The guarantee could be backed up by a mortgage over your property or via the lodgement of cash that would be held on term deposit.
Please keep in mind that passing the servicing test will not necessarily lead to an approval. Your Son is about to take on a large commitment that will require him to meet the regular repayments. If he has not shown a pattern of savings (or having a current rent commitment that is about to cease), some Lenders will classify the risk as unacceptable.
Perhaps your Son has sufficient savings to cover stamp duty and Legal's ? This is the preferred scenario that the lenders will look for.
As another alternative, where your income could assist your Son to get a foot in the property market is to consider an investment property in joint names. Your Son will be in the market, but this type of transaction needs to be planned carefully to ensure it fits with each of your long term goals.
Please give me a call if you would like to talk through the many options.
Best Regards
Ken Olds
1300 ASK KEN (275 536)