Family Security Guarantee
Saving for a home deposit is no mean feat. But there’s a way to make it more achievable, with a little help from those closest to you.
What is a Family Security Guarantee?
If you’re finding it tricky to reach a deposit of 20% or higher on your home loan, that’s where a Family Security Guarantee comes in.
It allows a family member to act as guarantor to secure your deposit, so you have a bit more borrowing power. This can reduce your Loan to Value Ratio (LVR) to under 80%, which means you can avoid paying Lender’s Mortgage Insurance (LMI) on top of your deposit.
Here’s an example of how the guarantee works
If you wanted to borrow $270,000 (to cover the loan amount, and other costs, but not LMI) for a property valued at $300,000.
Loan Amount ÷ Property Value = LVR
$270,000 ÷ $300,000 x 100 = 90%
With an LVR of 90%, LMI is applicable, which is an added cost. However, if you were to add a Family Security Guarantee of $40,000 as additional security, the LVR on your loan reduces.
Loan Amount ÷ (Property value + Family Security Guarantee amount) = LVR
$270,000 ÷ ($300,000 + $40,000) x 100 = 79%
With a new LVR of 79%, LMI would no longer be required, which could be a significant saving.
For the guarantor
If you choose to use cash instead of your home’s equity, that amount can be put in a Term Deposit as a guarantee for your family member, to help them enter the market sooner.
Know the detail
The term deposit rate applicable is the standard advertised rate. Interest will be paid monthly or annually on deposits from $5,000. The maximum deposit amount is 20% of the guaranteed loan value. It’s available to personal customers only, and will be held as a Family Security Guarantee against a home loan.
After the initial term investment, the Term Deposit will continue to roll over until the required Loan to Value Ratio (LVR) is achieved, and the guarantee can be released. You will be required to seek independent legal advice before offering to guarantee a loan. Please note the Term Deposit must be opened in branch or via Customer Care. Conditions, fees and charges apply.
You’ll also enjoy:
- More options – As the guarantee is limited, you can choose the amount you would like to commit, up to 50% of the loan value.
- More flexibility – You can be released from the guarantee as soon as the LVR drops below 80%. No need to wait until the loan’s fully repaid.
Know the risks
If you’re thinking about becoming a Guarantor in the Family Security Guarantee, there are a few things you should be aware of first:
- It’s a big decision to make, so ensure you’re confident with the borrower’s financial situation (and yours) to handle it.
- Keep in mind, a single guarantee is able to represent no more than 50% of the guarantor’s security.
- You’ll be liable for the amount you guarantee. That means you’re promising to pay Westpac that amount if the borrower can’t repay their loan and defaults. If you choose to use a Term Deposit as security, the whole deposit amount could be used, depending on the portion the borrower cannot repay. If you choose to use your home’s equity as security and don’t have cash to pay Westpac upfront if asked, your house may be sold to cover it.
- While acting as guarantor, your ability to borrow may be reduced.
- Make sure you read and understand the full Terms and Conditions of the guarantee, and ensure you seek the mandatory independent legal advice before making a decision and signing any documents.
For the borrower
With a Family Security Guarantee, you can enjoy:
- More borrowing power – Maximise the amount you can borrow; up to 100% of the purchase price, plus costs like Stamp Duty and Legal Fees.
- More to save – A guarantee can help you reduce or avoid Lender’s Mortgage Insurance, saving you money when you need it most.
- More choice – You may be able to enter the market sooner, with extra flexibility to choose the property that’s right for you.
Before you get started, ask yourself:
Are you eligible for the Family Security Guarantee?
To be eligible, you must be looking to purchase or refinance a new home for yourself, or an investment property.
Have you thought about home loans yet?
The Family Security Guarantee is available on a range of our loans, for purchase or refinance of owner occupier or investment properties. Note that, for investment properties, the borrower must not have ownership of any other properties at the time of application, and for owner occupied properties, a maximum of one other property may be owned which does not have sufficient equity to provide a security. Please speak to your lender for more information about your eligibility. Line of Credit and Bridging Loan products are not eligible under the Family Security Guarantee, and it cannot be used for the purposes of debt consolidation, owner builder construction, cash out, or adding of a security guarantee to an existing loan.
Do you have a family member who might be interested in helping you purchase your property?
They may be a parent, legal guardian, sibling, or your child aged over 18. It’s a big decision to make, so check they understand the benefits and risks, and ensure they’re confident about their financial situation (and yours) to handle it. Keep in mind, a single guarantee is able to represent no more than 50% of the guarantor’s security.
Are you on top of any expenses?
Make sure you’re aware of any extra buying costs, like Stamp Duty and legal fees. It’s critical that you have the budget to afford the loan, as the guarantee does not reduce or assist with home loan repayments.
Frequently asked questions
The borrower or the guarantor can ask to be released from the guarantee at any time during the loan term. We’ll consider each request, but usually only if:
- The repayments for all borrowers' loans are satisfactory; AND the Loan to Value Ratio is reduced to a point where Lender’s Mortgage Insurance isn’t required OR the borrower is prepared to pay an LMI premium.
This amount depends on a number of factors, such as:
- The proposed loan amount;
- The value of the proposed property to be guaranteed;
- Equity already held by the guarantor;
- The maximum guarantee that can be considered.
If you’re thinking of applying
Find out more information
Sharing the guide documents linked below with a willing family member could be a good way to start a conversation about guarantees, so you can both learn more about the benefits and risks.
Get in touch with a specialist
Chat to one of our Home Lending Specialists or your lender to work out if the Family Security Guarantee is right for you.
Credit criteria, fees, charges, T&C's apply.
The guarantor should consider the risks associated with the Family Security Guarantee, primarily that if the borrower defaults on their loan, the guarantor is liable to pay up to the maximum of the portion of security they have put forward as a guarantee. You will be required to seek independent legal advice before offering to guarantee a loan. Credit criteria apply to the assessment of the adequacy of any proposed guarantee limit.
Offer available on all loans eligible under the Family Security Guarantee, for purchase or refinance of owner occupier or investment property. Note that for investment properties, the borrower must not have ownership of any other properties at the time of application, and for owner occupied properties a maximum of one other property may be owned which does not have sufficient equity to provide a security. For new Family Security Guarantee Home Loan applications received from 23 October 2020. Family Security Guarantee can be provided by parents or legal guardians, siblings, and children. Equity access, owner builder applications, Line of Credit and Bridging Loan products are not eligible under the Family Security Guarantee. Other Exclusions may apply. Not available for the purposes of debt consolidation, owner builder construction, cash out, or addition of a security guarantee to an existing loan. $150k minimum loan size applies. Credit criteria, fees and charges apply. Offer may be varied or withdrawn at any time. Full eligibility criteria on the Family Security Guarantee is available on request.
Term Deposit: Interest paid monthly or annually, on deposits from $5,000 to a maximum deposit of 20% of the guaranteed loan value. Personal customers only – not available for business, corporate, institutional or government customers. After the initial term, you will need to continue to roll over the Term Deposit until the required Loan to Value Ratio (LVR) is achieved, and the guarantee can be released. Please note that the guarantee must be released prior to accessing any of the principal deposit amount. Once released, if the deposit or any part of it is withdrawn prior to maturity, an interest rate adjustment will normally apply. You must provide a minimum of 31 days’ notice to access funds prior to maturity (except in cases of hardship). At the time of home loan settlement, the Term Deposit will be locked and secured against the property until the determined loan value is reached, and the guarantee can be released. Term Deposit must be opened in branch or via Customer Care. Term Deposit Terms and Conditions available on request. Conditions, fees and charges apply. Offer may be varied or withdrawn at any time.
The information on our website is prepared without knowing your personal financial circumstances. Before you act on this general information, please consider if it's right for you. If you need help, call 131 900.