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Is it time to ditch the ‘security blanket’?…

And by ‘security blanket’ we mean your parent’s property currently used as security for your parental guarantee loan?

(See why we went with ‘security blanket’?!)

 

security-guarantee-loanWhen your parental guarantee loan was established some time ago, the lender took a limited guarantee over your parent’s property as additional security for your loan. This allowed you to keep the Loan to Value Ratio below 80%, avoid Lenders Mortgage Insurance and contribute a reduced amount of cash.

Whilst the second property was required at the time, the lender shouldn’t need the additional security forever. And perhaps (just maybe!?) your parents want to release their property so they can do other things – purchase an investment property, renovate their home, or even help other family members buy a house.

 

So, how do you know when it’s time to release the second security?

You can release your parent’s property from the parental guarantee when the value of your property alone is enough to provide all the security.  Generally speaking, this is when the amount you owe is no more than 80% of the estimated market value of your home.

This will happen as a result of:

  • you paying down the loan;
  • your property increasing in value; or
  • a combination of the two.

 

How do you go about releasing the security from a parental guarantee?

It’s generally pretty easy to arrange.  However, it will depend on your loan structure as to how exactly it will work.

For example – if you have split loans, one loan may increase to pay out the other and release your parent’s property in the process. In other cases, the loan amount(s) won’t actually change – it’s just a request to release one of the properties that secures the loan(s) – so there will be no change to your loan repayments or the day-to-day operation of your loan.

If you feel there’s a good chance the value of your property has increased enough to release the guarantee, give us a call on 02 6286 6501 and we can start investigating.

 




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