To Guarantor or Not to Guarantor: The Bank of Mum and Dad
For many parents, helping their children onto the property ladder is a top priority. One popular way to do this is by acting as a guarantor on their mortgage. But is it a wise financial move? Let's explore the pros and cons.
The Pros of Guarantoring a Mortgage
Faster Homeownership: By guaranteeing the loan, your child may be able to secure a larger loan amount or a lower interest rate, accelerating their path to homeownership.
Stronger Financial Position: A guarantor can make your child a more attractive borrower, potentially leading to better financial terms.
Family Unity: Helping your child achieve their dream of homeownership can strengthen family bonds.
The Cons of Guarantoring a Mortgage
Increased Financial Risk: As a guarantor, you assume financial responsibility for the loan. If your child defaults on their mortgage payments, you could be liable for the entire debt.
Impact on Your Own Financial Goals: Guarantoring a loan can limit your own borrowing capacity and affect your ability to achieve your financial goals, such as retirement savings or travel.
Potential Strain on Family Relationships: Financial stress can put a strain on family relationships, especially if things don't go as planned.
Before You Decide
Before agreeing to be a guarantor, consider these factors:
Your Financial Situation: Assess your own financial health and risk tolerance.
Your Child's Financial Responsibility: Discuss your child's financial habits and ability to manage their finances.
The Terms of the Guarantor Agreement: Understand the terms of the agreement, including the duration of the guarantee and the potential consequences of default.
Need More Advice?
If you're considering becoming a guarantor, it's essential to seek professional financial advice. A qualified financial advisor can help you weigh the pros and cons and make an informed decision. With the right strategy and guidance from your local St Kilda Mortgage Broker like WeNeedFinance, you can turn your home ownership dreams into reality.
Ready to take the next step?
Contact WeNeedFinance today to start your home ownership journey!
This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter. You should before acting in reliance upon this information seek independent professional lending or taxation advice as appropriate specific to your objectives, financial circumstances or needs. We are not in any way responsible for nor provides any warranty express or implied as to its accuracy or relevance.
WENEEDFINANCE Pty Ltd ABN 74 637 748 899 is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192.
