First Home Buyer – Parental Guarantee

Overview

The clients were an engaged couple looking to enter the property market and purchase their first home.

The female client’s parents had been long term clients of Vision and had referred them through to the team to discuss whether they would be able to purchase a $650,000 apartment with a savings of $20,000.

Both clients had stable employment and a relatively strong credit score.

The male client had a car loan of $15,000 with repayments of $560 per month.

In addition, both clients had credit cards, with total limits of $16,000 with $2,500 owing.

Obstacles

The client’s deposit of $20,000 was not enough to cover the minimum 5% deposit and associated purchase costs of the apartment.

The combined income was not strong enough to service the proposed loan as well as the existing car loan and credit cards.

Advice

To increase the borrowing capacity, the Broker recommended the client’s use their savings to pay out the car loan. By paying the car loan out, the clients were eligible for a loan of approx. $60,000 more. In addition, the Broker advised them to reduce the limit of the credit cards from $16,000 to $6,000, which further increased the loan amount by $35,000. The total additional funds of $95,000 enabled the clients to reach their desired purchase price of $650,000.

To mitigate the lack of deposit, the Broker presented the option of a Parental Guarantee Loan.

This allowed the couple to purchase a property using the equity in their parents’ property as deposit for their own home. This option even allowed them to retain the balance of their $5,000 in savings as personal ‘emergency’ money which brought peace of mind to the clients and their parents.

The Parental Guarantee loan has the benefit of allowing the clients to enter the property market sooner, avoid them paying the expensive Lender Mortgage insurance fee and often allows them to access a lower interest rate.

Outcomes

The Broker identified Lenders that offered the following:

Parental Guarantee Loan structure
Competitive interest rates
Generous serviceability guidelines (this can vary greatly between lenders)

By identifying the most suitable lender, the loan approval process ran seamlessly and the clients were able to move in to their new apartment within four months of approval.

Vision Finance made the process of buying my first home so understandable and easy. They were there with me through the whole process and I have never felt so comfortable and stress free doing something so significant. I can’t thank Katrina and her team enough. I have recommended the services of Vision Finance already and will be continuing to do so. I will also be using them for all my future needs!

First Home Buyer – Parental Guarantee

Overview

Obstacles

Advice

Outcomes

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