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Guarantee and Indemnity

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

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The bank 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 Bank will also request that a  Solicitor provide a Certificate of Independent advice.

The Indemnity is where you, for example,  indemnify the bank 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 bank may ask you to provide a personal Guarantee and Indemnity for the full loan amount.

Also if you have a company, the bank may ask you to provide personal Guarantee and Indemnity for the full loan amount.

The Bank will also request that the Solicitor provide a Certificate of Independent advice before the bank will provide the funds.
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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.