One Melbourne broker says recent changes by some lenders to guarantor requirements for home loans will provide much-needed help to many first home buyers, but says brokers need to ensure borrowers are made fully aware of the pitfalls – or risk facing client backlash later on.
Late last year, ANZ amended their guarantor policies, removing certain restrictions for guarantors to include extended family members and many believe other lenders are likely to follow suit.
The changes mean a guarantor will no longer have to be a parent, sibling, or spouse of the borrower for a security guarantee and that potential guarantors are likely to be approved on a case-by-case basis.
Loan Market broker, Alexander Heifetz, (pictured) says family and security guarantee loans are available to help first home buyers and families entering the residential real estate market who need an additional asset to secure their property, but says the deals often have the potential to go sour.
He says the policy change will aid certain first home buyers with 'healthy incomes but limited savings' to enter the property market with help from guarantees who traditionally haven’t been allowed to put their support behind a low-deposit holder’s mortgage.
However, while he says he appreciates that it’s a difficult time for both lenders and first home buyers, brokers need to make sure they’re helping clients view guarantee loans as a last resort – because it’s brokers in the end who are likely to be blamed when things go wrong.
“It comes back to brokers – banks have a bunch of lawyers who will stand up for them, but brokers are the middle men and they’re the ones who will be crucified.”
He says most guarantee loans are a single loan secured by both properties: the property purchased by the first home buyer and guarantors' property.
“The benefit of this option is that there is no requirement to make a lender’s mortgage insurance payment - and you don’t have to demonstrate that a deposit you have was genuinely saved.”
Heifetz has already seen an increased level of interest among first home buyers, but warns that many fail to recognise the potential for family conflict.
“I try to avoid family guarantee – it has a lot of pitfalls and it can cause trouble in the family. Wherever it’s possible, people should try and find an alternative solution.”