Join Australia's most dynamic and respected property investment community

Removing a guarantor?

Discussion in 'Property Finance' started by bamp, 11th Feb, 2016.

  1. bamp

    bamp Member

    Joined:
    11th Feb, 2016
    Posts:
    15
    Location:
    Sydney
    Hi guys, long time lurker, first time poster. Hoping someone will help me as I'm desperate...

    Has anyone who has had luck getting removed as a guarantor for a mortgage, please let me know what they had to do to remove it?

    I purchased a property for 300k and needed a guarantor in 2012. The property is now worth about 460k. Also I have about 130k in the offset.

    Would being able to revalue the property up, and pay down a bit of the actual debt make the bank likely to remove the guarantor?

    I have an appoint with the banks home loan specialist on Friday, but would like opinions on what is common so I don't get screwed over, as I want to pay down as little of the debt as possible.

    Thanks!
     
  2. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,982
    Location:
    Brisbane
    I would have thought that the property value rising so much would mean they could revalue and remove the guarantor without you having to pay down any loan?
     
  3. Jason Tyrrell

    Jason Tyrrell Well-Known Member

    Joined:
    8th Jul, 2015
    Posts:
    54
    Location:
    Sydney
    If the property has risen in value by over 50% there should be no problem, without having to pay the balance down further.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,111
    Location:
    Melbourne, Nationwide
    We recently removed the parents from a parental guarantee arrangement. It was a fairly simple process.
    1. Arranged a valuation to verify the updated value of the property.
    2. Submitted a 'partial release' form which described removing the guarantors from the mortgage and released the parents title back to them.
    3. Waited a few days for the bank to process the paperwork.
    4. Had the parents pick up the title to their house from the local branch.

    All you need to do as the customer is go back to the person who set up the loan and ask them to assist.
     
    York likes this.
  5. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    905
    Location:
    Melbourne
    If you have any trouble with the lender that set it up, an alternative is to refinance to a new lender, without the guarantee.
     
  6. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    864
    Location:
    Sydney (West) and Canberra
    Yes it should be relatively simple to do (timing/complexity will vary a little lender by lender) - a partial discharge process to remove the guarantor security of the loan.

    If the valuation doesn't stack up with the current lender, perhaps look around at other lenders (valuer shop). This may avoid having to use any of your cash if the existing lender is asking for it.
     
  7. bamp

    bamp Member

    Joined:
    11th Feb, 2016
    Posts:
    15
    Location:
    Sydney
    Thanks all for the comments, makes me breathe a little easier. Is there any guidance on the minimum property value increase that will let the lender remove the guarantor?

    Would 20% typically be sufficient?
     
  8. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    864
    Location:
    Sydney (West) and Canberra
    If your loan is $300k, the bank will need the value of the property to be at least 375k.

    The bank needs you to have a 20% deposit contribution (with no LMI).

    So 300/0.8 = 375k valuation required.

    Cheers,
    Redom
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,045
    Location:
    Sydney
    Should be very easy to do as long as you can still service (which may not be testedwith current lender) and have 20% equity.