Family Pledge Home Loans Allow Families to Help Each Other Out

June 29, 2012 by  Filed under: Loans 

What are family pledge home loans?

These are home loans that allow family members to pledge some sort of help to someone who needs to take out a loan but lack the ability to prove financial status.

In short, these are loans awarded to people who still do not have the ability to pay for the house.

Doesn’t that sound ludicrous?

If you are thinking of a conventional mortgage, then yes, it is ludicrous. There is no way a person without enough money can buy a house. It does not make sense especially when a lot of lenders today are very strict with their lending policies.

Typically, before a person can take out a loan, he or she must show proof of income, have a good credit score, and have enough money stashed in a savings account.

Some people who can meet these guidelines may even find it a little challenging to get approved for a loan. So how is it possible for certain individuals to still borrow money despite not having enough cash to cover the deposit?

This is the wonder of this kind of loan. A family pledge loan allows family members to extend a helping hand to their loved one. Essentially, this is similar to guarantor loans.

There are several benefits of taking advantage of this type of loan:
– It is possible to borrow 100% of the property value
– No deposit is required to buy a house
– The lenders mortgage insurance (LMI) can be waived
– Anyone can ask financial help from family members
– A person will be able to buy a house he or she would otherwise not be able to afford

A borrower who plans to ask for assistance from a family member can get help in the following ways:
– The parent or any family member can take out security from their property and use it to guarantee the loan.
– The guarantor agrees to provide the borrower with regular repayment assistance. This means the monthly payments can be shouldered by the guarantor. Though this is not very common, it exists.
If there are benefits to taking advantage of family pledge loans, there are also some disadvantages:
– The guarantor is obliged to repay the loan in case the borrower fails to do so
– The bank can take over the property of the guarantor in the event there is a default in payments
– The guarantor can only be released from the agreement under very strict terms
– Not all lenders are going to approve this type of loan

Taking advantage of a loan like this will require one to think carefully. There are lots of responsibilities that come with getting a family pledge home loan. It’s something that needs to be carefully thought of since someone is bound to lose a lot of money when the other party fails to do their part of the agreement.

This is why it is very important to get help from professionals. People who want to avail of family pledge home loans will need to get assistance from mortgage brokers. They can help you better understand the terms and conditions of the loan.

Also, not all banks would accept family members as a guarantor. Some will only consider parents as guarantors. But with the help of a mortgage broker, it is easier to identify the lenders who are willing to allow other family members to act as guarantors.

It’s great how family pledge loans help families help each other.

Unlike most regular home loans, a guarantor supported application can be quite complex. There are usually more people involved, two properties as security, limited guarantees and more restrictive bank policies. I am a part of a company that strive to offer what we promise: a higher level of service, better advice and better family pledge home loans.

Article Source:
http://EzineArticles.com/?expert=April_Rosas

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