Guarantor mortgage scenario
- John and Rachel purchase a $600,000 apartment with a 5% deposit ($30,000).
- They estimate their lenders’ mortgage insurance (LMI) premium using an online calculator and are shocked to learn they need to pay $25,000.
- Rachel’s parents own their home outright, and they agree to guarantee a further 15% ($90,000) of the property cost, which eliminates the LMI cost.
- John and Rachel repay $150,000 of their mortgage over the next few years. In addition, Rachel’s parents are no longer liable because the $90,000 they guaranteed has been repaid.