While 5% genuine savings is not required, brokers must ascertain an applicant's ability to repay the loan. This can be done by:
The following home loan products are available for a family guarantee application:
The following loan purposes are available for an owner occupied family guarantee application:
The Guarantee will be released when the Secondary loan (the Guarantor loan) is paid out in full.
In order to have the guarantee released earlier, the guarantor or borrower may request a revaluation at any time to confirm the LVR, subject to the payment of the valuation fee. If the principal security provides satisfactory security at an LVR of 80% or below, consideration can be given to the release of the guarantee and the mortgage/s over the guarantor's property.
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Primary Loan (Borrower loan) |
Secondary Loan (Family Guarantee loan) |
| Applicants
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Borrowers:
Purchasing applicants |
Borrowers: Purchasing applicants
Guarantors: Family member/s who own security being provided as additional security
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| Security | Secured by:
Security One: First registered mortgage (1RM) against property being purchased only |
Secured by:
Security One: Second registered mortgage (2RM) behind Heritage against security on Primary loan, and Security Two: Either first or second registered mortgage** against property offered as additional security under guarantee.
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| LVR | Max LVR against Borrower’s Security 80% | Heritage will consider a maximum LVR up to 70% against guarantor/s security.
An existing first mortgage debt with another financial institution on the guarantor/s security may be accepted, subject to LVR. |
| Valuation | Heritage requires a full valuation on the borrowers security. | |
| Servicing | The applicant’s income should be sufficient on a stand-alone basis to support both the Primary and Secondary loans within normal commitment percentage. | In all cases, Heritage needs to ensure that we will not be placing the guarantor/s into hardship if the guarantee for the second loan is called up.
In effect this will mean the guarantor/s must have the ability to meet any such loan ‘call ups' from means other than the sale of their owner occupied house. This could include other assets such as superannuation or any other investments with a realisable value. Alternatively, if no other assets outside of an owner occupied property are held, the guarantors must be able to service the secondary loan in their own right. Guarantor's income must not be used to assess the serviceability of the total borrowings. |
| Genuine savings | Applicant’s do not need to show 5% genuine savings, but do need to show capacity to repay the loan. | |
| Debt Consolidation | A few minor debts may be consolidated if they are less than 5% of the purchase price. Refer to Serviceability policy, Commitments section for verification requirements for debts being refinanced. These debts will be paid out and closed by Heritage according to standard procedures, and do not form part of the Cash Out Option. | |
| Cash Out Option | Only available to First Home Buyers purchasing an Owner Occupied home.
First home buyers may access up to $50,000 cash out for home improvements (must fit within LVR limits above). |
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| Documentation Requirements | Standard HBL requirements | All applications:
Refinance/Debt Consolidation/Second mortgage behind another financial institution: Copies of existing loan statements as per standard HBL requirements Investment security When relying on guarantor’s ability to clear or service the debt over an investment property: 1. Title search or rates notice are to be obtained, supported by guarantor's statement of position in the application form. Owner Occupied security When relying on guarantor’s ability to clear or service the debt over their owner occupied property: 1. Application form will initially be reviewed to judge whether guarantor/s may be placed in hardship. The asset and liability position of the guarantor/s should demonstrate an exit strategy other than the sale of their owner occupied property to clear guarantor loan if called up. If no assets or investments (excluding owner occupied property) are available to clear the secondary loan in full, see step 3 & 4 below. 2. If mitigating the use of guarantor's owner occupied security through some form of available clearance like superannuation, cash or shares: Evidence to be obtained- a copy of guarantor's most recent superannuation statement, share-holding statement or bank statement (if applicable). 3. If mitigating the use of guarantor's owner occupied security via guarantor's ability to service the guarantor loan from PAYG or other income: Evidence to be obtained- information on application form may be accepted,or 4. If concerns remain re 3 (above), we may seek some form of servicing assessment for the guarantor/s to confirm they will not be in hardship if the guarantor loan is called up. |
| Additional Requirements | A guarantor is to be interviewed separately from the borrower.
Guarantor/s are to be provided with full loan application details for all loans connected with security. The guarantor needs to be able to make the decision based on all pertinent financial facts. The borrowers will authorise the provision of all relevant financial information to the guarantor and any or other documentation required by law and/or applicable standards. |
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| Release of Guarantee | N/A | The guarantor or borrower may request a new valuation at any time to confirm the loan to value ratio (at the cost of the borrower/guarantor).
If the principal security provides satisfactory security at an LVR of 80% of below, consideration can be given to the release of the guarantee and the mortgage/s over the guarantor/s property (subject to approval). At time of closure/payout of the Secondary Loan the guarantee/s and the mortgage/s over the guarantor/s property will be released upon request by the Guarantor/s. |
| Restriction | Individual applicants are restricted to a maximum of one family guarantee/borrowing | |
* A registered second mortgage (2RM) behind an existing first mortgage (either to Heritage or to other financial institutions), is acceptable to support the guarantee except where the existing first mortgage is a reverse mortgage-styled facility and the Bank is unable to establish a defined amount for priority under the first mortgage.
** If the security being provided by the guarantor is already secured by mortgages to Heritage, as long as sufficient equity exists to fit the LVR requirements, it does not matter what number mortgage this new mortgage would be, i.e. a 3RM is acceptable.