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What is a family equity loan?
Also known as a guarantor home loan, a family equity loan allows a ‘guarantor’ (usually a family member) to offer the equity in their own property as additional security against your loan if you have a smaller deposit than the expected amount for your home loan.
Even though your deposit is smaller, you may not have to pay lenders mortgage insurance (LMI) with a guarantor home loan. However, if you are unable to make repayments, your guarantor will be held liable for the loan and may have to make the missed repayments on your behalf.
In the worst case the guarantor will be liable for any shortfall between the sale of the property and outstanding loan balance, should the lender end up selling the property to recover the loan.