1 Comment 1 Commentby Susan Edmunds
Under Springboard a borrower can make up the deposit on their home loan by using equity on family members' properties.
Borrowers would end up with two loans – one for the bulk of the mortgage and the other held jointly with a family member.
The person providing the equity as security for the second loan would have no liability for the rest of the mortgage.
Westpac head of retail distribution Ian Blair says the product gets around an often-frought issue of parent’s or a family member guaranteeing a loan.
The key point here, he says, is that the parent’s, or whoever is contributing to the loan, are only responsible for ensuring the Springboard Home Loan is repaid.
“They have no liability attached to the rest of the home loan.”
He also says the borrower can avoid paying a low equity premium on a loan which would apply if the deposit was less than 20% of the loan.
However some commentators see it as a way of circumventing the proposed restrictions on low equity loans.
Claire Matthews of Massey University’s Centre for Banking Studies said it was just relabelling systems that the banks already offered. Most banks allowed a customer to use a guarantor on a loan if they did not have sufficient deposit.
“Whatever rule they put in place, people are going to find a way around it. [This is] quite clearly going to enable somebody to buy a house with a lower level of deposit than the LVR rules are trying to require.”
Kirk Hope, Head of the Bankers Association, said he would not be surprised to see other organisations develop products that met the needs of specific sectors of the population.
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