How do you remove yourself from being a guarantor in Australia?

In terms of how to remove yourself from being a guarantor in Australia, there are some situations where you may be able to request to be removed from a home loan. You may be able to do this directly to the lender, who will conduct assessments to determine whether the borrower is capable of supporting the remaining mortgage on their own.

What happens if a guarantor sells their house?

You cannot sell your home whilst serving as a guarantor if its equity is acting as security for another borrower’s home loan. It must remain under your ownership until the borrower reaches a certain loan-to-value ratio (LVR) threshold (such as 80% LVR) or is successfully able to refinance to remove you from the agreement. However, if you own multiple properties, you may be able to transfer from one to another to facilitate the sale of the original (which will also be subject to lender assessment).

Will a default affect a guarantor’s credit report?

It can – if you default on your home loan, this may have an adverse impact on your guarantor’s history also. As such, it’s important to keep ahead of your loan repayments not just for your sake but also the sake of your parent, grandparent or someone else close to you.

Does a guarantor affect my mortgage interest rate?

In most cases, yes – guarantors can have a positive impact on your mortgage interest rate as a result of the added security they bring. If you’re an applicant without a particularly strong profile (such as a lack of borrowing history or a medium to low income-earner), having a guarantor with equity in property and a more stable financial position will significantly increase the confidence your lender will have in you that the loan will be repaid.

Can my partner serve as my guarantor?

Yes – if your partner fits the criteria to qualify as a guarantor, they can be accepted by your lender as a guarantor for your mortgage. However, there may be more scrutiny on the part of the lender here, as they’ll want to avoid a situation where you and your partner separate and are left without anyone to pay the mortgage. This is unlikely, though, and you can refinance to remove the guarantor from your home loan once you’ve built equity in your property.

Am I able to remove my guarantor before I reach 80% LVR on my mortgage?

Yes – in some cases, you may be able to refinance to remove your guarantor from your home loan before you have at least 20% of your home’s value in equity. This will require you to pay LMI, however, so you should try to avoid refinancing your home loan before this point wherever possible to potentially save you thousands of dollars.