Guarantees and guarantors FAQ

A: A joint borrower (co-borrower) is someone who chooses to borrow money with another individual or business. A joint borrower is responsible for regular repayments on their home loan and repaying the loan in the event of a default.

A guarantor provides a guarantee, which is a promise to pay the borrower’s debt if they are unable to do so. A guarantor will only become liable for the amount they have guaranteed, which could be the full amount of the home loan along with interest and fees.

A: The main consideration with guarantor home loans is that they must be provided by someone who has a strong relationship with the borrower(s), which generally means immediate family members such as parents, siblings, grandparents, spouses or de facto partners.

It is not the case that just anyone can act as a guarantor. One of the guarantor home loan requirements stipulates that there must be a link between the guarantor and the borrower(s), and there must also be a financial benefit for the party offering the guarantee.

There are a number of considerations for guarantor home loan requirements that we will take into account, these include:

• Age
• Whether their property is in Australia
• If there is sufficient equity
• Whether they are currently employed

A guarantor also needs to be of sound mind and will need to seek both legal and financial advice before making the decision to act as a mortgage guarantor.

A: When you apply for credit, you might need to tell the credit provider about any loans you are a guarantor on. This can affect your borrowing capacity, especially if you want to borrow against the property you have provided as security.

A: If you decide to sell the property, then the additional security is required to be removed from the loan. This could mean that the borrower(s) might need to pay Lenders Mortgage Insurance (LMI) or come up with the funds to avoid the need to pay LMI. Due to the reduction in security on the loan, the loan amount might be more than how much we are willing to lend to the borrower(s), even with LMI. In this case, the request to release your property as security might be declined. A cash contribution might be requested to reduce the loan down to an acceptable maximum, or we might ask for another guarantee to be put in place.

In any event, it can be complicated and costly to remove the guarantee if you want to sell, so you should factor this in before agreeing to the guarantee.

A: You can ask us at any time for a statement of the amount the borrower(s) currently owes, any amounts debited or credited, overdue amounts and when they became overdue. This information will be given to you verbally unless you ask for it in writing.

A: You must contact us as soon as possible to discuss your options.