People keen to enter the real estate market but unable to save sufficient funds for a home loan deposit can achieve their goal by drawing on the equity in a family property, according to leading mortgage broker Loan Market.
Loan Market Sunshine Coast Broker Dominic Polifrone said family equity options were available to help first home buyers and families entering the residential real estate market.
“They are becoming increasingly popular with people wanting to get into the property market and they can also enable some first time buyers to purchase their property at a higher level,” Sunshine Coast based Mr Polifrone said.
Mr Polifrone said under the family equity guarantor’s support policy, parents or another immediate family member can help with loan servicing and security support.
“The most popular of the family equity options is the limited liability guarantor and we are noticing an increase in inquiries for this in the Sunshine Coast area,” he said.
“Under this option two loans are taken out, one at 80 per cent of the property value, which is secured by the purchaser, and one at the remaining required percentage which is secured by the property of parents or another family member.
“The benefit of this option is there is no requirement for lenders mortgage insurance and no need to show proof of genuine savings required under a 90 per cent Loan to Valuation Ratio (LVR).”
Mr Polifrone said parents can be relieved of the equity responsibility once the total loan value reaches less than 80 per cent of the property value.
“But all parties do need to be aware that in the case of a default, the family members are liable for the 20 per cent they secured,” he said.
Mr Polifrone said the family equity option was ideal for first time buyers with healthy incomes but limited savings and also enabled them to enter the market at a higher level.
“This could be referred to as the second home buyer level, where buyers normally use the equity in their first property to upgrade,” he said.
“For first home buyers earning high incomes, there’s an opportunity to buy a property worth $700,000 now that was previously worth $900,000 at its peak. This is an opportunity that might not be there forever.”