Family Pledge Home Loan Option
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Family Pledge Home Loan Option
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Product Description
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The Family Pledge option allows family members (the term “family member”
refers to parents, grandparents and siblings) with equity in their own
property, to help customers bridge the deposit gap and cover up-front
borrowing expenses, by providing a limited guarantee in support of the customer’s
loan application. Applicants will be able to maximise the amount they can
borrow against their own security, i.e. the purchase property, with this
additional limited guarantee from a family member. The guarantee is to be
supported by a registered first mortgage over the family member's property or
a registered second mortgage.
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Key Benefits / Target Market
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The Family Pledge option is ideal for customers wanting to utilise the
assistance of family members to maximise the amount they can borrow against
their purchase property.
It can apply to both homebuyers and investors that have good ability to
repay but lack the sufficient equity to secure the additional funds they need
to meet up front loan costs and expenses associated with the purchase of
their home or investment property.
Key benefits are:
The benefits for the borrower are:
- Allows them to
maximize the amount they can borrow – up to 100% of the purchase price,
plus costs such as Stamp Duty and Legal Fees. The consolidation of small
personal debts may be considered as an exception to policy
- Helps to reduce or
avoid LMI premium.
The benefits for the guarantor are:
- It will allow the guarantor
to nominate a specific amount the guarantee is limited to, rather than a
traditional “open” guarantee for the entire loan amount.
- The guarantor can
ask us to release the guarantee at any time (standard credit policy in
regard to LVR's apply).
Example: a customer wishing to purchase a $300,000 property and borrow
$285,000 would have an LVR of 95%, which would incur an LMI premium.
If a family pledge guarantee of $60,000 was added as additional security,
the LVR would reduce to 79%.
The LMI premium would not be payable, saving
the customer up to $5,800.
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Availability
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The Family Pledge option is available on the following Home Loan products:
- 1 Year Introductory
Fixed Rate home loan
- Discount Variable
Rate home loan
- Standard Variable
Rate home loan
- Negotiated Variable
Rate home loans (Professional Package) (not Portfolio products)
- Fixed Rate home
loans
- No Deposit Home Loan
Existing loans - Family Pledge is not available
for existing loans.
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Fees
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Fees are payable regardless of the loan applied for. There are no extra fees for the Family
Pledge Option but the standard guarantee and legal fees will apply.
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“Pledged” Security
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Only one property can be used as the pledged security but that property
can be used for more than one loan.
As an example, parents with two children can use their property on both of
their children's loans.
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Process
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The normal Home Loan approval process will continue to be followed for
these loans.e.
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Releasing the guarantee
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The Bank will agree to release the limited supported guarantee (and
related Mortgage) when:
- The LVR, based on
the Security Value of the borrower's property and Total Security
Exposure (TSE) does not require LMI (in terms of the prevailing policy
at the time of the request). An updated valuation is required to
determine the Security Value.
- If LMI is still
required, the borrower does have the option of paying the LMI premium
based on the current LVR.
- Standard Partial
Discharge fees apply.
The guarantee can be released at the borrower's or guarantor's request.
The borrower or guarantor may request a revaluation of the borrower's
property at any time, subject to the payment of the requisite valuation fee.
Providing the LVR is under the LMI threshold or the LMI premium is paid, the
guarantee and the mortgage that supports it will be released.
The release of the security property will not be an event which is
initiated by the bank, or which occurs automatically or at a predefined time
during the loan term. It will occur at the borrower's or guarantor's request,
and will be subject to the bank's consent at that time.
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Family Pledge Calculation
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To calculate the amount of Pledge required covering LMI:
- For a residential
property home loan, divide the loan amount by the resultant LVR, say
80%, and subtract loan amount required
- For a rural property home loan, divide the
loan amount by the resultant LVR, say 70%, and subtract loan amount required
For Example:
Generic Example:
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Family Pledge option
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Security
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Security Value (SV)
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Loan required
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$500,000
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Total Security Value required
(Loan divided by required LVR)
E.g. $500,000 ÷ 80%
= $625,000
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$625,000
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LESS: Purchase price or Valuation, whichever is the
lesser
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$500,000
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EQUALS: Limited Guarantee amount required from family
member - supported by mortgage from guarantors over acceptable security
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$125,000
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LVR (loan amount / total security value)
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80%
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Note:
- The LVR policy for
each residential security property type will determine if LMI is
required.
- The security value
of the supporting security is to be equal to, or greater than, the
amount of the guarantee.
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Actual scenario:
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Family Pledge option
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Security
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Security Value (SV)
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Loan required
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$310,000
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Total Security Value required
(loan divided by required LVR)
E.g. $310,000 ÷
80% = $387,500
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$387,500
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LESS: Purchase price or Valuation, whichever is the
lesser
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($295,000)
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EQUALS: Limited Guarantee amount required from family
member - supported by mortgage from guarantors over acceptable security
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$92,500
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LVR (loan amount / total security value)
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80%
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Note:
- The LVR policy for
each residential security property type will determine if LMI is
required.
- The security value
of the supporting security is to be equal to, or greater than, the
amount of the guarantee.
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