What Are Parental Guarantees?

A parental guarantee allows you to use a portion of your parents’ property as the security on your home loan.

That means your parents, for instance for a $500,000 purchase, they will allow $100,000 of their own property to be secured against their own property to cover the deposit without  you having to pay any Lenders Mortgage Insurance. 

But you can take it further.

You can use that security to cover your stamp duty obligations as well, this isa bout 6% of the the purchase price. 

There is some risks to this strategy, especially if you don’t buy a property that goes up in value.

If you default on the loan, it’s your parents who will also suffer. The bank will come after the property they put up as security on the loan (after they sell yours). They’ll have to pay what you owe or lose the property.

So you have to feel very confident you are buying well in a good location and that you can handle the repayments before you go down this route. However, it will get you into the property faster, which means you can use our First Home Financial Freedom Framework to turn it into an investment property. Join our First House Buyer community to learn more about our framework.