Heritage Bank today announced the launch of its Family Guarantee loan that allows people to help their family members into the property market.
In a statement the bank said the new approach is particularly useful for parents who can use their own home equity as security for new home loans for their children.
Heritage’s Family Guarantee works by splitting the total amount across two loans — one loan secured by the property being purchased, and the second loan partially secured by the parents’ property as guarantors.
The bank said this structure reduces the LVR to 80 per cent and helps the borrowers avoid the need for Lenders Mortgage Insurance, thus making the loan more affordable.
“We’re excited about launching this new way for parents to give their kids a helping hand to achieve the dream of owning their own home,” Heritage Bank CEO Peter Lock said.
“It can be tough for young people to get their foot into the door of the property market. Many parents are looking to help them out but also have to be mindful of their own financial situation.
“The Family Guarantee is an option that can provide a great solution for all those needs.”
Heritage’s Family Guarantee offers several additional features including:
• First Home Buyers who are also owner-occupiers may be eligible for $50,000 additional borrowings for home improvements, if covered by the family members guarantee.
• The loan is available to both owner occupiers and investors, and is not restricted to First Home Buyers.
• Heritage will also allow several minor debts to be consolidated, if they are less than 5 per cent of the purchase price. This is a feature that many other financial institutions don’t allow.
The Family Guarantee is available across the following loan types:
• Home Advantage Package
• Standard Variable Rate Home Loan
• Fixed Rate Home Loan
• Discount Variable Rate Home Loan
• Discount Variable Rate Special Offer Home Loan