A Family Pledge or Limited Guarantee facility allows you to borrow up to 100% of the purchase price plus costs, without paying any Lenders Mortgage Insurance (LMI) costs.

The loan is secured by the purchase and the additional security provided by the guarantors security. The guarantors liability is limited to the difference between the 80% LVR amount and the amount borrowed.

Family Pledge Quick Facts:

• You can borrow 100% of the purchase price, plus costs, without paying LMI

• The Guarantee provided by your parents is limited to a portion of the loan rather than the entire loan amount

• The limited guarantee can be removed at any time, as long as there is sufficient equity in the remaining security

• Guarantors can only be grandparents, parents, siblings or sons or daughters of the borrower(s)

• The guarantee is to be supported by a registered first or second mortgage over the family member's property

Family Pledge example:

A couple with a deposit of $115,000 wants to purchase their first home for $800,000. They need to borrow 95%, or a loan amount of $760,000 which attracts LMI costs of $25,000. If however, additional security of $150,000 were added by a guarantor, then the LVR would be reduced to 80% meaning LMI costs are not incurred. In this example the limited guarantee would be $120,000 which is the difference between the loan amount and 80% of the purchase.

The client also gets the added benefit of obtaining an interest rate at 80% LVR levels instead of paying higher rates for loans at a 95% LVR.

Releasing the Guarantee:

• The Limited Guarantee can be released at the borrower or guarantor’s request.

• If the Limited Guarantee is released when the total loans reflect an 80% LVR, no LMI costs are charged when releasing. If the LVR exceeds 80%, LMI will be charged by the lender.