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Servicing Guarantor

Discussion in 'Property Finance' started by Rayan, 17th May, 2016.

  1. Rayan

    Rayan Active Member

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    My best friend and her husband wish to upgade their current PPOR. Based on the own income (one partner on maternity leave, and three dependents) they would not qualify for a loan size large enough to secure the property they are keen on.

    The in-laws have offered to help- not by way of a lump sum though. They have offered to help only toward repayments on the new loan.

    In my experience there is no such bank which will accept potential servicing help from the bank of mum and dad in a valid loan application. Am I incorrect in this assessment? Is there a way to use their offer to help with the mortgage repayments to validly obtain a larger loan for the couple?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Servicing guarantors in this sort of scenario is a thing of the past.

    These days - using parents as guarantors generally involves using one of their properties as collateral for yours. Not using the folks income to service the debt.

    Some lenders are ok with mat leave - Anz, nab broker and Cba spring to mind.

    Cheers

    Jamie
     
    Last edited: 17th May, 2016
  3. tobe

    tobe Well-Known Member

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    Quite a few lenders can use the Mrs. Pre maternity leave income if she has a letter stating the income she will be returning to. Otherwise the olds need to borrow money on their house and lend it on to the kids.
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Your pretty much correct! There's not too many realistic options when borrowers don't service loans. A few thought rumblings:

    You may find that servicing differs greatly lender to lender - there are better mat leave lenders out there that may take into account her income if returning to work.

    Another way is to have parents on the title (joint ownership). That will allow their income to be put on the loan, but it does create its own set of problems which likely outweigh the benefits.

    Could have parents borrow money and pass it down too (will likely need to be gifted though) and it sounds like parents are unwilling to do this.

    Not sure if ANZ still have their well off parents offer for servicing guarantors - but if the parents are very wealthy, they may be able to do it via ANZ (assuming still on offer, not something i've written before). There is a pretty strict criteria on parents wealth/income for it.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I believe ANZ are still doing servicing guarantors, but as Redom said they have to be very well off in their own right - income over $250k/yr and other criteria too.
     
    albanga likes this.
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    NCCP issues pretty much sideline guarantees of that nature.

    Quite a few lenders will do "return to work servicing" as long as have cash to make up the short fall in the meantime

    ta

    rolf
     
  7. Lamby

    Lamby Member

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    Could the parents not go on the mortgage properly rather than guarantor? Or is that not an option?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Only if they were a legal owner too.
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Yes

    But most lenders will want them to have an equitable share. And the while thing could actually reduce the chances of getting a loan in the first place.

    Mixed stage of life borrowing is generally regarded as troublesome by lenders unless the is a clear exit if the deal goes sour.

    Ta

    Rolf
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Yes

    But most lenders will want them to have an equitable share. And the while thing could actually reduce the chances of getting a loan in the first place.

    Mixed stage of life borrowing is generally regarded as troublesome by lenders unless the is a clear exit if the deal goes sour.

    Ta

    Rolf
     
  11. Rayan

    Rayan Active Member

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    Thank you so much for all the information.

    The parents are very well off- multi-millionaires- and retired. I have advised her that the only way they could do it is if the parents borrowed against their significant portfolio and on-lent the funds.

    And the most important step is to get a good broker upfront!
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perhaps she could borrow as much as possible with the parents lending the rest.

    Or the parents could lend the lot.

    Later on if she has enough income to qualify the loan from the parents can be refinanced to a bank.