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Guarantee and Indemnity

Typically, a lender may ask you, as a parent, to provide a guarantee for your child’s home loan when a property is being purchased.

It is common that the bank may ask you to guarantee upto 20% of the total loan.

The guarantee that you provide can help to secure the loan when the deposit is, say, 5%, and the guarantee can also avoid paying the bank’s mortgage insurance.

As the guarantor, you will be liable for the repayment of the guaranteed amount, plus interest and legal costs, if there is a default in the repayment of the home loan.

Also, often the lender may ask that you provide a registered mortgage on your own property as security for the guaranteed amount.

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The lender will request that you obtain Independent Legal Advice for the giving of the guarantee before you sign the agreement so that you have a proper understanding of your legal obligations.

The lender will also request that a  Solicitor provide a Certificate of Independent Advice.

The Indemnity is where you, for example,  indemnify the lender for any loss and damage it may suffer as a result of the default on the loan.

This amount is on top of the amount that was guaranteed.

If you have a self-managed super fund and are borrowing funds to purchase a property, and the trustee is a company and you are the directors of that company, the lender may ask you to provide a personal Guarantee and Indemnity for the full loan amount.

Also, if you are purchasing a property in a company name or family trust, the lender may ask you to provide a personal Guarantee and Indemnity for the full loan amount.

The lender will also request that the Solicitor provide a Certificate of Independent Advice before the lender will provide the funds.

LegalPro Lawyers can provide the Certificate of Independent Advice to satisfy the Lender's requirements.

LegalPro Lawyers can also provide the Certificate of Independent Advice if you are taking out a "reverse mortgage" on your property.

The indicative Legal Fees to peruse the Lender's Loan Documents, the Guarantee and Indemnity, and to provide the Independent Certificate of Advice are as follows:

Mum and Dad Certificate of  Independent Advice to guarantee child's deposit: $660 incl. GST

Personal Certificate of Independent Advice to  Guarantee company loan $770.00 incl. GST

Personal Certificate of Independent Advice to Guarantee S.M.S.F. loan $880.00 incl. GST.

Personal Certificate of Independent Advice for "reverse mortgage" is $660 incl GST
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First of all Better Call Paul

At LegalPro Lawyers, we can provide the independent advice and certificate requested by the bank for the Guarantee and Indmenity.

FIRST OF ALL BETTER CALL PAUL    02 8628 0415 or 0401 657 713.