If you’re one of the thousands of Australians who’ve opted for this unique type of home loan, understanding how and when to remove a guarantor is a must. 

If you’re unfamiliar with the concept, read more about how they work on our previous blog post: guarantor home loans. They are quite similar to a standard home loan, however the major point of difference is a selected guarantor – commonly a parent – offer their own assets (usually one property) as security to the loan. 

Considering the benefit of side stepping saving for a 20% deposit, guarantor home loans are on the rise. While they have proven to be an incredibly effective strategy for breaking into the property market faster, understanding how to remove a guarantor and when you should do so is equally important. 

Understanding The Process Of Removing A Guarantor 

While the risks of becoming a guarantor aren’t to be denied or dismissed, the good news is that defaults of this magnitude are relatively uncommon. In addition, many guarantors have the option to only “cover” the buyer until they have paid back the 20% deposit minimum, or until their property value grows so that the loan balance is under 80% of the property value. 

If you have made consistent repayments to your mortgage and have significantly reduced the size of your loan, you may be able to remove a guarantor, as this will relieve them from the financial risk of being in such a position. Most homeowners who have gone down the path of a guarantor loan aim to remove a guarantor as quickly as possible, but there are a few factors that will dictate whether a lending institute will allow their exit. 

To avoid being hit with Lenders Mortgage Insurance, guarantor loans are generally in place until the borrower has repaid a minimum of 20% of the total loan, or until their property value grows so that the loan balance is under 80% of the property value. 

While each lending institute will have slight variations linked to specific guidelines, the general rule is that a guarantor will remain linked to the property in question until the primary buyer actually applies to discharge the guarantor. Until the lending institute approves the changes, the guarantor home loan will still apply. 

As a general rule, guarantor loans tend to remain in place anywhere between two and five years. However, this figure can fluctuate depending on how quickly the primary borrower is able to pay down their loan amount, and how fast their property increases in value.

To remove a guarantor you can refinance your mortgage. Alternatively, most banks will allow a borrower to remain on the same loan product when removing a guarantor at 80% LVR.

Thankfully, this is when the help of an industry professional can be invaluable in reducing stress and saving time from start to finish with Guarantor Loans – but where do you find one?

Partnering With The Home Loan Professionals 

Navigating the complex world of home loans as a first home buyer has long been regarded as stressful, frustrating and time consuming – but if you can find the right advice on how guarantor home loans work, then the good news is that it doesn’t have to be.

Since their inception in 2012, the team at Madd Loans have worked tirelessly in providing over 2,000 Queenslanders with finance options to help turn their dreams into reality. With the entire brand being built on referrals, owner George Samios takes great pride in making the loan process both fun, educational and stress free – and he has a swag of awards to prove it.

If thinking about your financial future strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality.

While rising mortgage repayments and skyrocketing inflation are placing unprecedented pressure on Aussie households, what can you do to reduce financial stress? 

As the Reserve Bank has just raised interest rates for the fourth time in just four months, Australians are bracing for further pain when it comes to managing rising mortgage repayments. The official interest rate – otherwise known as the cash rate – is now sitting at its highest level in six years at 1.85%, and economists and citizens alike are wondering how we got here when compared to the record low of 0.1% that still applied as recently as May 2022. 

What makes matters worse, is that many economists believe that the RBA is only half way through its rate hike cycle, with the goal being to reach or exceed an eye watering 3% by the end of the year. As the cost of money goes up, the big four banks have dramatically raised interest rates for existing customers with variable-rate loans, and further rate rises are still expected to come. 

While the number of borrowers refinancing their home loans are at record high levels, is the answer to dealing with rising mortgage repayments simply shopping around? Sometimes, but not always. 

Three Ways To Deal With Rising Mortgage Repayments 

As many people already know, interest rates are the main tool used by central banks to manage the rates of inflation. In layman’s terms, raising interest rates makes borrowing money more expensive, but it can also lead to more returns on savings and super, which earn interest on growth. When borrowing becomes too expensive, this can also mean less demand for goods and services.

For many Australians, rising interest rates means increased repayments on mortgages, loans and credit cards. With less disposable income, many people may need to tighten their belts.

Interest rate rises can be tough for families and small businesses, as increased mortgage and debt repayments can make life more difficult and expensive for those who haven’t taken precautions to protect themselves against such fluctuations – so what are effective ways to manage rising mortgage repayments?

Home Loan Health Check – If you’re struggling with rising mortgage repayments, it’s important to remember that there’s an industry expert ready and waiting to help: your mortgage broker. Before making any big financial decisions based around rising interest rates and how to budget for them, take a trip to your local broker to see what their thoughts are on your current loan structure, features and benefits, and even lending institute.

Assess Your Budget – Start by establishing a clear budget so you know exactly how much disposable income you have coming in each month. If you already have a budget in place, factor in your mortgage repayments, debts, taxes, and necessities, plus make forecasts on how much extra you might need to pay in the event of an interest rate rise. This way, you’ll be better prepared and not caught off guard when it inevitably happens again in the future. 

Make Extra Repayments – Making extra repayments to your mortgage or setting aside extra money into your offset or redraw facility could pay dividends in the long run, especially if your current interest rate is sitting lower than what it traditionally would be. Even if you don’t have access to an offset facility, now is the time to set extra funds aside to give yourself a buffer fund. In simple terms, getting ahead with your mortgage is one key way to avoid potential stress. 

If you’re one of the thousands of Australians currently feeling the pinch of rising mortgage repayments, rest assured that you’re not alone. With the cash rate only set to increase further, there’s never been a better time to be proactive and get in touch with your local mortgage broker – but where do you find one?

Partnering With Home Loan Professionals 

Navigating the complex world of home loans has long been regarded as stressful, frustrating and time consuming – but if you can find the right advice on sourcing how mortgages work, then the good news is that it doesn’t have to be.

Since their inception in 2012, the team at Madd Loans have worked tirelessly in providing over 2,000 Queenslanders with finance options to help turn their dreams into reality. With the entire brand being built on referrals, owner George Samios takes great pride in making the loan process both fun, educational and stress free – and he has a swag of awards to prove it.

If thinking about your financial future strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality.