Family Equity

Discussion in 'Loans & Mortgage Brokers' started by Raphael, 28th Oct, 2009.

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  1. Raphael

    Raphael Member

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    Some family are seriously considering this option for me to buy my first home, just wanted a little further advice on how it works.

    This is how I read it:

    I want to buy a house for $400,000. My family want to pitch in $40,000 worth of equity in their home. I also pitch in $40,000 cash to total an $80,000 deposit and therefore having a $320,000 mortgage.

    Am i completely off the ball? If so, can someone explain it to me in simple terms on what it means.

    Cheers
     
    Raphael, 28th Oct, 2009
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    Sounds about right.

    Will you need to pay this money back? If so, how will you pay them back? Will you pay them interest? Is this instead a gift from them to you? You do realise they will be paying interest on any money (equity) they draw out of their own home?
     
    Simon Hampel, 28th Oct, 2009
    #2
  3. davo6253

    davo6253 Well-Known Member

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    Also depending on what lender you go with and how you structure the loan the guarantor may be also be jointly liable for the entire loan if you were to default (if they are just withdrawing cash out of redraw / portfolio you needn't worry about this scenario) check what you are signing!
     
    davo6253, 28th Oct, 2009
    #3
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Good point.

    There is a huge difference between someone just drawing out cash to help you with a deposit ... and them being a guarantor for your loan.

    If there is talk of guarantors at any point - be very wary and make sure everyone gets good legal advice before they sign anything.
     
    Simon Hampel, 28th Oct, 2009
    #4
  5. Raphael

    Raphael Member

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    Thank you.
     
    Raphael, 29th Oct, 2009
    #5
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