Market Advices


Family Equity Loans

Family Equity Loans

Family Equity products are a popular alternative for borrowers with no or low deposit. Also known as Family Pledge or Family Guarantee, these products allow family members (generally the borrowers’ parents) to provide a guarantee by using their home equity as security for the loan. Family equity guarantees can also be provided in the form of an income/loan serviceability guarantee.

Who should consider Family Equity Products?

  • Borrowers with low or no deposit may use family equity to avoid or reduce their Lenders Mortgage Insurance (LMI) fee potentially saving thousands of dollars
  • Borrowers who would like to borrow more may utilise a family equity option to get a bigger loan
  • Borrowers who would like to purchase property sooner

Family equity guarantees can be complex finance products and require all parties concerned to be aware of their financial & legal obligations.  For example, it may be beneficial to look at splitting the loan to limit the parent’s equity guarantee exposure, by establishing an interest-only portion on the larger loan, with a view of having the parents’ security released as quickly as possible.

At WeLend we can assist you in choosing the most suitable family equity loan option and loan structure.

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