If a borrower can afford the repayments on a home loan but does not have sufficient savings to cover the usual deposit (20% of the home value) plus other costs associated with purchasing a home (such as stamp duty and legal fees), they will normally have to pay lenders mortgage insurance because the loan amount is more than 80% of the value of the property being purchased. Lenders mortgage insurance can be quite expensive.
To avoid the borrower having to pay lender’s mortgage insurance (or to reduce the amount of lender’s mortgage insurance the borrower has to pay), a family member can provide a secured limited guarantee to IMB to support the loan. This additional security means IMB may provide a loan amount that is more than 80% of the value of the property that the borrower wants to purchase without (or with less) lender’s mortgage insurance.
