Family Guarantees

AMP

Family Guarantor Policy- Who can apply? 

Borrower

• First Home buyers purchasing a residential property that they intend to live in and meet the following
  • Max Loan amount $1mil
  • Property must be located in zones 1 & 2
  • Loan repayment type must be P&I only
  • Not available on investment loans

Guarantor

• Must be parents of one of the borrowers and meet the following criteria
  • Must own the property used as a guarantee, and all security holders must become guarantors
  • Guarantors property must be located in zones 1 & 2
  • Property must be unencumbered or already mortgaged to AMP Bank
  • Only one guarantee per application

ANZ

Guarantors are limited to immediate family

• Parents / Step Parents
• Grandparents
• Siblings (brothers and sisters)
• Children
• One Security Guarantee per borrower to assist with the purchase of a single property. This can be either for Owner Occupancy or Investment, but is limited to one property.
• (Refinance is acceptable, provided it is for the $ for $ refinance of a loan which was for the purchase of a single property. There can be no cash out or any additional/increase in lending).

Bank Australia

Family Guarantor Policy:

• Only accepted from parent/s (or step parent/s) of the borrower/s
• Loan amount cannot exceed the purchase price plus costs
• Bank will limit the guarantee to the amount required to avoid LMI on all occasions in order to protect the guarantor/s liability
• An application to release a guarantor may occur when the loan liability is reduced to accept LVR of the borrower's security

Bank of Melbourne / Bank SA / St George

• 100% of purchase price + upfront borrowing expenses accepted.
• Security guarantee only.

The following eligibility criteria must be met for Parental / Pledge:

• Purchase a property for:
• ​own occupation or investment where the applicants do not have ownership of any other property at time of application OR
• own occupation where the applicants have ownership of a maximum of one other property AND
• the already owned property does not have sufficient equity to provide security for the new purchase (without incurring mortgage insurance).

Ownership rules apply at time of application. The percentage of ownership does not impact the above rule.

• Increases to home loans with Family Pledge are allowed but the Family Pledge amount may not be increased
• Individual applicants are restricted to a maximum of one parental / family pledge borrowing
• No single guarantee is to represent more than 50% of the guarantor's security
• Serviceability is required to be demonstrated by the borrowers only and no income is to be taken from the guarantors 
• If the guarantor has an existing (prior) mortgage, staff are to confirm that the existing facility is not a reverse mortgage styled facility (including the Bank's Senior Access Home Loan product). Where the existing facility is a reverse mortgage, the application is unable to proceed as the Bank is unable to establish a defined amount for priority under the first mortgage.

Note:

• Where the customer initially purchases vacant land with a family pledge home loan option, but they do not currently have a build contract in place, an internal refinance of the land loan may be undertaken at a future date to permit the construction of a dwelling on the land. A new family pledge will need to be prepared at the time the internal refinance occurs to allow the increased borrowing amount. 
• If customers A & B jointly purchase a property and subsequently a relationship breakdown occurs resulting in the property being transferred to A or B singularly, the Bank can consider providing finance to either A or B with a new family pledge being taken. This subject to normal loan assessment conditions being met and the existing joint debt being repaid. This scenario would require referral to Credit for consideration.

Bank of Queensland

Family Guarantor Policy

• For income verification see the requirements on te Guarantor Details Form
• For Family Guarantors who are PAYG, BOQ does not need to validate income and financial commitments listed on the guarantor's statement of financial position, but we must include them when calculating guarantors serviceability.
• Family Guarantor cannot be a spouse, director, shareholder, beneficiary/uniholder of a trust of the borrower

Bankwest

Family Guarantor Policy - Use this policy for :

• Residential Home Loans supported by a guarantee from a family member

Don't use it for :

• Non-residential properties
• Off the plan purchases
• Co-borrowers
• Non family member or third parties
• Refinances of Property 1

Borrowers :

• Must be 18 or over
• Be able to service the total repayment. Servicing guarantees not acceptable.
• Cannot rely on foreign income for servicing
• Cannot already own a residential property
• Cannot apply for an increase to obtain cash out

Guarantors :

• Must be 18 or over
• Be family members
• Have independent legal advice
• Be interviewed face to face
• Cannot rely solely on government payments (e.g. Disability pension)

Security :

• Bankwest must hold the first mortgage over the guarantor's property

CBA

Restrictions:

If using a personal guarantor the guarantor must be 18 years or older living/working in Australia and an Australian citizen or Australian Permanent Resident or NZ citizen or Australian citizen 18 years or older living/working overseas.

If using a business guarantor it must be an Australian registered company or a trust where the trustee is an individual or company

The guarantor must be interviewed face to face by a bank officer and obtain independent legal advice and provide a statutory declaration.

Acceptable Purpose:

Standard: Residential property purchase, refinancing existing loan if original purpose was for personal use and guarantor is the existing guarantor of existing loan. Renovations/home improvements to existing or proposed residential security property where release of funds is controlled by the bank.

Expanded: All other not listed above. Refinance applications where guarantor isn't an existing guarantor are considered Expanded Purpose.

Loan Structure

Recommended structure of loan is 80/20 cost split unless customer requests a different structure. An 80/20 cost split is:

- first loan is 80% of the purchase property and secured by the purchase property only

- second loan is secured by the purchase property and the guarantor’s property

Family Security Support isn't available for:

Borrowers who do not have an ownership interest in at least one security property supporting the loan unless the purpose of the borrowing provides direct benefit to the security provider, e.g., adult son or daughter borrowing for the purpose of providing aged care for their parents using their parent's property as security.

Individual guarantors receiving a Government pension and using their principal place of residence as security, unless the security is in joint names with the borrower.

Off the plan purchases or loans where foreign income is used for servicing.

Individual guarantors who are not a family member of the borrowers, e.g., friend or neighbour.

Note: Guarantor/s may be liable for the whole amount of the loan if there is a default in payment by the Borrower/s AND Borrower/s may be liable for the whole amount of the loan if there is a default in payment by the Guarantor/s.

Heritage

**A registered second mortgage (2RM) behind an existing first mortgage (either to Heritage or to other financial institutions), is acceptable to support the guarantee except where the existing first mortgage is a reverse mortgage styled facility and the Bank is unable to establish a defined amount for priority under the first mortgage.If the security being provided by the guarantor is already secured by mortgages to Heritage, as long as sufficient equity exists to fit the LVR requirements, it does not matter what number mortgage this new mortgage would be, ie. a 3RM is acceptable.

ING

Family support is accepted subject to the following:-

• Eligible family member as co-borrower/mortgagor
• Loans to a maximum of 100% of the purchase price may be considered, however evidence of genuine savings is preferred as this supports the ability to meet commitments.

In terms of this section immediate family members can be described as:-

• An adult child (including an adopted child, step child etc.)
• A parent or grandparent
• A sibling

Under this section support can be achieved four ways:-

1. Guarantee and mortgage for security support only
2. Eligible Family Member as co-borrower/mortgagor
3. Sole borrower – relative borrows in own name using own security and on-lends to the family member

Restrictions:

• Funding to a maximum of 100% of purchase price
• No LMI
• No cash out or refinancing of other debts
• No interest only or equity type facilities
• Guarantor’s security is to be acceptable
• Our overarching position is that any guarantor should not be placed in a position of hardship in guaranteeing or supporting a loan approved under this section
• As a minimum, financial assessment is to be made of the guarantor’s position both now and what could be reasonably expected in the future if the primary borrower were to default on the loan (This could take into account such issues as age, asset position and a “fall back” position for the guarantor should a default occur)

La Trobe

La Trobe does not have a traditional family guarantee policy, instead they offer a P2C product which allows for the guarantor to invest their funds through La Trobe to cover the shortfall the children have on their loan.  

The children are on title and service the loan the but the parents are providing a fully registered 2nd mortgage to the children and this is controlled and managed by La Trobe.

This means that the children do not need to pay LMI which can be a very expensive additional cost to the children.

How the P2C Loan works

The broker submits two  loans to La Trobe for processing, the first will be for the max LVR La Trobe can offer on that scenario (usually an 80% LVR ) and then a second application covering the funds to complete which will be supplied by the parents. The parents must have access to the funds to complete as cash as this is invested in the La Trobe Mortgage fund.

La Trobe then prepare the mortgage documents, and the client has a 1st mortgage with La Trobe and the 2nd mortgage with La Trobe that is funded via the parents.

There is no LMI payable on this loan and the parents can decide what return they want on their investment. La Trobe's recommendation is a minimum of the CPI rate plus 0.75% (this covers the trail to the broker and our costs to manage the loan).

Currently the minimum would be 2.25% and then La Trobe add 75 basis points to this rate to cover the trail to the broker and our cost of administering the loan. So the children would have a second mortgage rate of 3%. The parent may decide that they want a return of 4% as this is better than cash in the bank and sothe child would be charged 4.75% for the second mortgage.  The first mortgage is at La Trobe standard rates currently 4.69% for full doc clean credit O/O or 4.79% for investment.

If there are any issues regarding paying on time etc then La Trobe  follows  this up not the parents. If the child’s relationship  breaks down then the child’s partner still has to repay the loan and the parent does not lose their money!

Any loan that La Trobe can do as a first mortgage such as: credit impaired, lo doc, commercial, construction etc. can have a P2C loan behind it and anyone can provide the funds it does not need to be a parent.

Me Bank

Is accepted however, the Guarantor must demonstrate a beneficial interest in the loan transaction ie. marital or de-facto relationship only.

MyState

LVR Restriction: The maximum loan facility for applications assessd under the Parental Guarantee loan structure is $600,000. The maximum LVR on the guarantors property is 70%. Parental Guarantee Standards:

• Only Parents can be Guarantors under this program
• Guarantors must agree to execute a guarantee limited to an amount which is no less than that required to acheive Maximum LVR not requiring Lenders Mortgage Insurance for applicable property types plus an allowance for costs
• First or Second mortgage security only, accepted over property in the names of the Guarantor(s)
• Term Deposits are also accepted for security with 100% LVR available
• The guarantor(s) must be able to establish their ability to meet minimum servicing capacity requirements, inclusive of a commitment for the guarantee debt.
• Loan/s are to be either a single application in borrowers name(s) (multiple splits allowed) with both properties as security or 2 loans with the main loan secured by the property owned by the borrowers and the guarantor loan secured by borrowers property & guarantors property.
• Principal & Interest repayment basis only. No interest only (construction excepted)
• Limited to purchase of owner occupied property or refinance of existing owner occupied home loan debt. No additional funding allowed.
• Vacant land that is to be used for construction of owner occupied property is also accepted as long as construction to be completed within satisfactory time frame, ie. 12 months to completion.
• Borrowings limited to coverage of full property purchase price or cost of land purchase and construction plus 50% Stamp Duty & Government costs to a maximum of 105% of borrowers property value
• Borrowers must evidence own funds sufficient to cover remainder of costs to complete
• • Borrowers must meet the following minimum employment and servicing requirements
  • Minimum of 6 months with the current employer, OR
  • At least 2 years continuous previous experience within the same industry.

Note:

• No servicing support from guarantors will be accepted 
• Guarantors must seek independent legal advice prior to executing any loan documentation.

NAB

Effective from 25 May 2020, NAB will not accept parents as guarantors on their home loans or investment loans.

NAB will not be able to do no deposit home loans for first home buyers who want to use their parents on their home loan.

It updated their guarantor lending policy to ensure that it could “meet regulatory requirements and provide customers with a better experience,” during this unprecedented coronavirus pandemic.

What if I have already applied for a NAB guarantor home loan?

The following conditions will apply if you had lodged a guarantor home loan application with NAB before 25 May 2020:

• If your application has not been conditionally approved yet, the previous policy will apply until 30 August 2020.
• If your application is already pre-approved, then it will be accepted under the previous policy criteria for up to 90 days.
• If you have an off the plan or vacant land guarantee purchase, then it can be accepted under the previous policy for up to 12 months from the date of the original application.

For applications lodged on or after 25 May 2020, the guarantor home loans will be assessed under the new guarantor policy.

What types of guarantors can they still accept?

However, NAB will still accept the following guarantee applications:

• Spousal and de-facto guarantees (servicing guarantees if borrower and guarantor are a married couple or in a de-facto relationship)
• Company director guarantees (company borrower and company director can offer personal guarantees)
• Trustee guarantees (trust borrower and trustee can offer personal guarantees)

Pepper

Acceptable provided there is no additional cash out and guarantor's property is investment

Qudos

Restriction: Accepted for first home buyers only. The amount of guarantee would be the amount required for the overall LVR to sit at 80%

Qudos can refinance family guarantees from existing owner occupied family guarantees. 

Suncorp

• 80/20 split, can lend above 100% of the purchase price for costs only.  The preference of the bank is to not use the guarantor's owner occupied property.
• Parents only
• Servicing guarantors not accepted, security only

Teachers Mutual Bank/Unibank/Firefighters Mutual/Health Professionals

Restrictions: Can fund 100% plus costs however can not provide funds for cash out. Maximum LVR 80% against the purchase property value and the remaing loan will be secured against the Guarantor/s property. Must have one of the following relationships with the applicant:

• Partner of the applicant (i.e. spouse/de facto)
• Family member of the applicant (i.e. parents, child, sibling, grandparent or granchild)

Guarantor must:

• Be at least 18 years of age
• Be acceptable to the Bank taking into account their financial position (i.e. income, expenditure, assets, liabilities)
• Complete a ‘Guarantor Information Form’

Note: Guarantee will be limited to a specified amount and must be supported by a first ranking charge over a security property acceptable to the Bank The loan amount to be guaranteed will be set up as a separate loan under the borrowers name secured by the borrowers and guarantors security

Documents:- Verification of Mortgagors (& Guarantors where applicable) are:

• Mortgagors original identification must be sighted
• Identification details must be completed on the ‘Verification of Mortgagor Identity’ form by the accredited broker
• A photocopy of the original identification must be taken and endorsed as true copies

Westpac

Maximum lend :

90% LVR including LMI

Second Mortgage Loan behind another lender :

Yes, add 20 % Buffer to Parents Debt.

Refinance Family equity to family equity :

Case by case. Refer to BDM