Families always have each others’ backs. This is very true in a lot of circumstances especially when trying to buy a house.
Today, people who are worried about not qualifying for a mortgage loan due to different circumstances will be able to get a loan with the help of relatives through the familypledge home loan.
What is this loan?
This type of loan is one that allows borrowers to get approved for a mortgage with the help of family members. Here, a borrower who is more likely to get denied due to different reasons, could still get the money he needs to buy a house with the help of family members.
A relative—parent, sibling, or child—can help the borrower by acting as a guarantor. This means the family member will allow the borrower to use their property as a loan security. They can also choose to help the borrower make monthly payments or do both.
Why is this procedure practiced?
This procedure is practiced to allow people the chance to buy their own homes. There are certain circumstances when someone would not be able to afford to pay for a house without the assistance of someone.
And since it is common for individuals to turn to family whenever there are problems like this, it’s only reasonable to allow people to seek the help of relatives when taking out loans.
2 types of loans where family members can act as guarantors
Repayment guarantee loan – this is an unusual type of home loan because guarantors agree to give the borrower assistance with the payments. This is great for the borrower because this can help him save some money. Additionally, if ever he finds himself without any money, the guarantor can take care of that. The borrower has to make sure, first, that the home has equity.
Security guarantee loan – in this home loan type, the guarantor will agree to make his own property a loan security. That means the borrower is borrowing money against another person’s property.
Is this beneficial only to the borrower?
At first glance, the family pledge home loan is extremely beneficial to the borrower. Who wouldn’t want to seek the help of relatives in applying for a mortgage when you can have them provide a loan security, and possibly, regular payments for your house?
Those things are surely something that will make it easier for any individual to own a house.
This type of loan is perfect for first-time borrowers who have a good source of income but don’t have equity. Borrowers also do not have to pay for LMI or Lenders Mortgage Insurance. Additionally, borrowers can borrow 100% of the price of the home.
But what about the guarantors? Are there any benefits for them as well?
It’s given that family members do not usually mind lending a helping hand, even if it means they have to shell out a lot of money just to help out someone. This is inherent in most families, especially those with close-knit ties.
But when it comes to things like buying a home, it is important that both sides benefit from the situation. It would seem foolish if the borrower is the only one who is getting the long end of the stick. There has to be something in store for the guarantor as well.
Fortunately, there is good news for guarantors. One of the advantages for them is they get to decide how much the guarantee/borrower is given. They can also ask the bank to release their house any time they want and they do not have to worry about getting the short end of the stick because banks are not allowed to take action against guarantors unless every other option is covered.
Nothing is better than achieving a milestone in your life, like buying a house, together with the people you love and care for. The family pledge home loan is the perfect example how families can stick together to help a member.
