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Buying your first home is an exciting milestone, but navigating the financial aspects can feel overwhelming. One of the most important concepts to understand as a first-home buyer is borrowing power, which is the amount a lender is willing to lend you based on your financial situation. By knowing how borrowing power is calculated and what impacts it, you can take steps to improve your financial position and unlock greater opportunities when it comes to purchasing your dream home. This guide will help you understand borrowing power, outline the factors that influence it, and share actionable tips to help you maximise it. Plus, we’ll explain how Horizon Bank’s local experts can make the process smoother, simpler, and more rewarding. What is Borrowing Power? Borrowing power refers to the maximum amount of money a lender is willing to lend you for a home loan. It’s influenced by a range of financial factors, including your income, expenses, credit history, and the size of your deposit. How is Borrowing Power Calculated? Lenders assess borrowing power by closely examining your financial situation. This includes looking at: ● Your Income - How much you earn from your job or other sources. ● Your Expenses - Your living costs, from rent to groceries. ● Existing Debts - Any current repayments, like credit cards or personal loans. ● Credit History - How well you’ve managed past debt. ● Deposit Size - A larger deposit can enhance your borrowing capacity. For instance, a higher annual income combined with lower monthly expenses signals to lenders that you’re in a strong position to repay your loan. Why Does Borrowing Power Matter for First Home Buyers? Borrowing power determines the maximum amount you can borrow, which directly affects the types and price range of properties you can consider. Knowing this number early in your home-buying journey helps you set realistic expectations, refine your budget, and focus on homes within your financial reach. Factors That Influence Borrowing Power Understanding the main factors that impact borrowing power can help you identify areas where adjustments could lead to improved loan eligibility. 1. Your Income A stable, higher income means you’ll likely have more borrowing capacity. Lenders prefer borrowers with predictable pay, such as salaried professionals or those with steady income from other sources. 2. Your Expenses The more you spend on non-essential items, the less money you’ll have left over for loan repayments. Lenders will carefully review your spending habits, so reducing discretionary costs can boost your profile. 3. Existing Debts Credit cards, car loans, or other debts reduce the amount you can borrow. Lenders see this as a liability when calculating your borrowing power, so reducing or eliminating debt is ideal. 4. Your Credit Score A strong credit history shows lenders that you’re reliable when it comes to repayments. Conversely, late payments or defaults can limit your borrowing capacity. 5. Deposit Size The bigger your deposit, the less you’ll need to borrow. A 20% deposit is often a key threshold, as it can eliminate the need for Lenders Mortgage Insurance (LMI). 6. Interest Rates Lower interest rates can boost your borrowing power by reducing the cost of repayments. Horizon Bank offers competitive, customer-focused rates designed to help first-home buyers. 7. Loan Term Opting for a longer repayment term can lower your monthly obligations, increasing your borrowing capacity. However, this also means you’ll pay more interest over the life of the loan. Tips to Maximise Your Borrowing Power If you want to increase your borrowing capacity and secure better loan terms, consider the following practical strategies. Reducing existing debts is one of the most effective ways to improve your borrowing power. By paying off personal loans, car loans, and eliminating credit card debt, you lower your liabilities and present yourself as a less risky candidate to lenders. This frees up more of your income, allowing you to borrow more for your home. Increasing your income can also positively impact your borrowing capacity. Whether it’s negotiating a salary raise, taking on freelance work, or starting a side hustle, any additional income strengthens your financial position in the eyes of lenders. Saving for a larger deposit should be a key focus. A bigger deposit not only reduces the amount you need to borrow, but it can also improve your lending profile. It may help you avoid Lenders Mortgage Insurance (LMI), saving you additional costs in the long run. How Horizon Bank Can Help At Horizon Bank, we understand that buying your first home is a major milestone, and we want to make the process easier for you. Personalised Support Horizon Bank prides itself on providing personalised, local customer service. Our team doesn’t rely on overseas call centres or one-size-fits-all answers. Instead, we get to know your financial circumstances and work with you to develop a clear, achievable plan. Competitive Rates and Flexible Options As a customer-owned bank, our profits are reinvested in our members through lower interest rates and improved loan options. We’re here to help you make the most of your borrowing power with loans tailored to your needs. Expert Guidance for First Home Buyers Buying your first home involves many moving parts, but you don’t have to go it alone. Whether it’s helping you reduce debt, save for a deposit, or understand government grants, we’ll be with you every step of the way. Take Control of Your Borrowing Power Maximising your borrowing power is all about thoughtful planning and having the right support system. By understanding how borrowing power works and taking concrete steps to boost it, you’ll be in a stronger position to make your property dreams a reality. Take the first step today! Speak to one of our Horizon Bank lending experts to learn more about increasing your borrowing capacity and securing your first home loan. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank. 

From Application to Approval for a First Home Loan Buying your first home is an exciting milestone, but navigating the home loan process can feel overwhelming at first. With the proper guidance, however, you can move smoothly from application to approval and unlock the door to your new home. At Horizon Bank, we specialise in making this process straightforward and stress-free for first-home buyers. This blog will take you through every step of the home loan process, from preparation to final approval, so you know exactly what to expect. Along the way, we’ll share actionable tips to make your application as strong as possible and demonstrate how Horizon Bank supports you at every stage. Preparing for Your Home Loan Application Before submitting your application, it’s essential to lay the groundwork. Proper preparation can help ensure your application is reviewed quickly and increase your chances of approval. Assess Your Borrowing Power Start by understanding how much you can afford to borrow. Borrowing power depends on factors such as your income, expenses, existing debts, and the size of your deposit. Use Horizon Bank’s borrowing power calculator or speak with one of our local lending experts to get a clear idea of how much you can realistically borrow. Save for Your Deposit Your deposit plays a crucial role in the application process. Ideally, aim for a 20% deposit of the property’s value to avoid Lenders Mortgage Insurance (LMI). If saving for a larger deposit isn’t possible, Horizon Bank can guide you through options for higher Loan-to-Value Ratios (LVR). Check and Improve Your Credit Score Lenders review your credit score to assess your financial reliability. Ensure you have a strong credit history by paying bills on time, reducing debt, and fixing any errors on your credit report. Minimise Debts and Expenses Reduce or eliminate any existing liabilities, such as credit cards or personal loans, before applying for the loan. Lowering your monthly expenses helps demonstrate your ability to manage future loan repayments. Gathering the Required Documents Getting your paperwork together before submitting your application will save you time and effort. Here’s what you’ll typically need to provide when applying for a home loan. ● Proof of Income - Provide recent payslips, tax returns, or a letter from your employer to confirm your earnings. ● Bank Statements - These should detail your savings history and daily expenses. ● Identification: Have government-issued photo ID ready, such as a driver’s license or passport. ● Details of Existing Debts - Include credit card statements or records of any outstanding loans. ● Property Information (if applicable) - Share the sale contract or a summary of the property you’re planning to purchase. By gathering these documents in advance, you can streamline the application process and prevent delays. At Horizon Bank, our team will guide you on exactly what’s needed so you can be fully prepared. Submitting Your Application Once you have all your documents ready, it’s time to submit your home loan application formally. How to Apply Complete a detailed application form, providing accurate information about your financial situation and the property you wish to buy. Horizon Bank’s loan specialists will review your application and may recommend loan options tailored to your specific needs. What Happens Next? After submission, the bank will review your information and determine whether to proceed. You’ll be asked for clarification or additional documents if needed, so please respond promptly to avoid delays. Horizon Bank’s personalised service means you’ll always have a direct point of contact who can guide and update you throughout this step. The Assessment Process After receiving your application, lenders conduct an in-depth review to decide whether to approve your loan. Here’s what they look at during the assessment phase: ● Your Income and Expenses - Lenders confirm you can comfortably afford repayments based on your financial situation. ● Your Credit History - A strong track record of managing debt works in your favour. ● The Property’s Value - If you’ve already chosen a property, lenders will ensure its value supports the loan amount. How Long Does It Take? The assessment process can take anywhere from a few days to a couple of weeks, depending on the complexity of your application. At Horizon Bank, we take pride in our efficient processing times, ensuring that things move smoothly for you. Conditional Approval Once your application passes the initial assessment, the lender may issue conditional approval. This means your loan will be approved as long as you meet specific conditions. Common Conditions to Fulfil ● Providing additional documentation (e.g. updated payslips). ● Completing a satisfactory property valuation. ● Submit further details about your finances if requested. During this stage, stay in close contact with your lender. Horizon Bank makes this process seamless by providing clear instructions and proactive updates. Final Approval and Settlement After meeting all the conditions of your conditional approval, you’ll receive final approval for your home loan. This is the last step before settlement—where ownership of the property is transferred to you. What Happens at Settlement? Your solicitor or conveyancer will coordinate with the bank and seller to finalise legal documents. Horizon Bank will arrange the transfer of funds to complete the purchase. You’ll receive notification when everything is complete, and the property is officially yours. Managing Timelines While the settlement process usually takes several weeks, Horizon Bank ensures smooth coordination to avoid delays. We’ll work closely with your legal team to make the final stage as stress-free as possible. Tips for a Smooth Application-to-Approval Journey Applying for and securing a home loan doesn’t need to be daunting. Here are some tips to keep the process on track and efficient. ● Be Organised - Gather your documents early and keep them up to date. ● Communicate Promptly - Respond quickly to requests for additional information or documentation. ● Avoid Major Financial Changes - Refrain from applying for new credit or making large purchases during the home loan process. ● Choose the Right Lender - Work with a local lender like Horizon Bank, which understands your unique needs and provides hands-on support. Start Your First Home Loan Journey with Horizon Bank Buying your first home is a big step, but with the right partner by your side, it doesn’t have to feel overwhelming. Horizon Bank is dedicated to supporting first home buyers with competitive rates, local expertise, and a personalised approach. From application to settlement, we’re here to guide you every step of the way. Ready to get started? Speak to a Horizon Bank lending expert today to begin your home loan journey with confidence. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank. 

Buying your first home is one of life’s most exciting milestones, but the road to homeownership often comes with many questions and challenges. How much can you afford? What kind of loan is right for you? And, most importantly, how can you save while making such a significant investment? At Horizon Bank, we understand these concerns, and that's why we’re thrilled to introduce a loan specifically designed for first-time buyers, offering incredible savings to help you take the first step into homeownership. Here’s everything you need to know about our First home buyer loan. What Makes This Loan a Top Money-Saver? When you’re purchasing your first property, every dollar matters. That’s why this loan prioritises affordability with features that deliver real value. Zero Horizon Fees – Yes, Really One of the standout features of this loan is zero Horizon fees. That means no annual or monthly establishment fees or offset account fees. With the cost of buying a property often feeling overwhelming, these cost-saving features provide much-needed relief. Flexible Loan-to-Value Ratio (LVR) Achieving homeownership can feel out of reach when a large deposit is required. With this loan, you can borrow up to 95% of the property’s value, making it possible to get started with a smaller deposit. Keep in mind that anything above 80% will require LMI or guarantor. Principal & Interest Repayments This loan operates on principal and interest repayments, helping you gradually build equity in your property while keeping payments manageable. Why This Loan Stands Out for First-Time Buyers We understand that first-time buyers face unique challenges, so this loan is built to address your needs head-on. ● Affordability: The lifetime discount and zero fees significantly reduce your costs.● Accessibility: A high LVR lowers the deposit barrier so you can enter the property market sooner.● Certainty: With no hidden fees, you can plan your finances confidently. The lifetime 1% discount meant Jessica saved $38,000 in interest over the 30-year term. The zero establishment fees gave her breathing room during the upfront buying costs. Now, Jessica is happily settled in her new home, and her repayments remain manageable thanks to the affordable terms. How to Maximise Your Savings with This Loan Saving with this loan starts with understanding your options and staying financially prepared. Here are some tips to ensure you get the most out of it: Improve Your Credit Score A strong credit score can help you secure even better terms on a loan. Before you apply, pay off smaller debts and maintain a clear credit history. Set a Realistic Budget Ensure you know how much you can afford monthly without stretching yourself too thin. Horizon Bank’s loan calculators can help you estimate your repayments. Explore Government Support First-time buyers in Australia may be eligible for government grants or stamp duty exemptions. Research what’s available in your state to complement your savings with this loan. Ask Questions If you’re unsure about any part of the process, contact Horizon Bank. Our experienced, friendly staff is here to help first-time buyers every step of the way. Your Next Step Towards Homeownership Making the leap to buy your first home can feel daunting, but with Horizon Bank’s First home buyer loan, you can confidently move forward. The savings on interest and fees and the flexibility of a high Loan-to-Value Ratio make it easier than ever to achieve your homeownership dreams. To see how much you could save, try our loan calculators or speak with one of our friendly team members today. At Horizon Bank, our mission is to make your path to owning a home a smooth and rewarding experience. Take the first step towards homeownership. Contact us today or visit one of our branches to explore your options. With Horizon Bank by your side, the future looks brighter. Horizon Bank has a branch network spanning the NSW South Coast and Illawarra. Horizon Bank branch locations: Albion Park, Bega, Bermagui, Berry, Merimbula, Moruya, Nowra, Thirroul, Ulladulla & Wollongong. Frequently Asked Questions Q: What does 95% LVR mean?A 95% Loan-to-Value Ratio means you can borrow up to 95% of the property’s value, leaving you to contribute the remaining 5% as your deposit. Remember, anything above 80% will require LMI or guarantor. Q: Can I use this loan for an investment property?This loan is available for owner-occupied homes or investment property for first-time buyers. Q: Are there any hidden fees?No, this loan comes with zero hidden fees. The focus is on transparency and cost-effectiveness for first-time buyers. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank. 

Guarantor Myths Busted – What You Need to Know When considering a home loan, especially for first-time buyers, the idea of using a guarantor often comes up. A guarantor can play a significant role in helping you secure a loan, but there are plenty of misconceptions out there about what being a guarantor entails. To clear things up, we’re debunking some of the most common myths, so you can make informed decisions about guarantor-backed loans. At Horizon Bank, we’re here to guide you through every step of your home loan journey, ensuring clarity and confidence in your decisions. Myth #1 - Guarantors Must Make Regular Loan Payments One of the most widespread misconceptions is that guarantors are required to make regular payments towards the loan. This is not the case. The primary responsibility for loan repayments always lies with the borrower. The guarantor, however, does step in as a safety net. If, and only if, the borrower is unable to make payments, the guarantor may be required to cover the outstanding amount. It’s worth noting that this is often a last-resort scenario once all payment recovery options have been explored. Guarantors aren't required to contribute to monthly repayments as a matter of course. How This Works in Practice For instance, if you’re a parent acting as a guarantor for your child’s first home loan, you won’t be paying anything unless something unexpected happens. This safety net reassures the lender but doesn’t interfere with your own financial routine. Myth #2 - Guarantors Are Tied to the Loan Forever Many people believe that once you sign as a guarantor, you’re locked in for the entire duration of the loan. This is another myth. While it’s true that you do take on a commitment, it’s not necessarily a lifetime one. Guarantors can be released from their obligations under certain conditions. A common example is when the borrower reduces their loan-to-value ratio (LVR) to 80% or less. Once the borrower has built enough equity in the property, the guarantor can apply to be removed from the arrangement. At Horizon Bank, we advise guarantors to establish clear terms upfront and communicate with the borrower about progress on the loan. Myth #3 - You Can’t Act as a Guarantor If You Have a Mortgage Another misconception is that having an existing mortgage disqualifies you from becoming a guarantor. This isn’t correct. While lenders do assess a guarantor's overall financial position, having a mortgage doesn’t automatically rule you out. Lenders will evaluate your income, current debts, and overall financial stability to determine eligibility. If your finances are in good shape, you can still act as a guarantor - even if you’re currently repaying your own home loan. An Example in Action Say you own a home and still have a mortgage, but your financial commitments are manageable. You may still be able to guarantee part of your child’s home loan, helping them reduce costs without compromising your existing obligations. Myth #4 - Guarantors Only Cover the Cost of LMI Some believe that guarantors are only required to step in for Lender’s Mortgage Insurance (LMI), which protects the lender if the borrower defaults. While guarantors can indeed help borrowers save on LMI by reducing the LVR, their role doesn't stop there. Guarantors effectively provide the security a borrower might lack. This means guaranteeing a portion of the loan amount instead of simply covering LMI fees. Their involvement often helps borrowers access better loan terms or secure a property sooner. At Horizon Bank, we often see guarantor-backed loans as a practical way to support loved ones without handing over any cash payments. Why Understanding Guarantor Roles Matters Understanding what being a guarantor involves ensures that both the borrower and guarantor enter the arrangement with clarity and confidence. A guarantor-backed loan can make home ownership more achievable for many Australians, but it’s vital for everyone involved to know their rights and responsibilities upfront. Talk to Horizon Bank Experts Still have questions about guarantor-backed loans? At Horizon Bank, we’re here to help. Our friendly team can guide you through the details, provide personalised advice, and help you explore the best home loan option for you. Visit your nearest local branch or contact us today to learn more about how we can support your home loan goals. Together, we can make your dream of home ownership a reality. Horizon Bank has a branch network spanning the NSW South Coast and Illawarra. Horizon Bank branch locations: Albion Park, Bega, Bermagui, Berry, Merimbula, Moruya, Nowra, Thirroul, Ulladulla & Wollongong. If you'd like more information, explore our FAQs or take advantage of our home loan options. We’re here to help you every step of the way. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank. 

When you’re preparing to buy your first home, you’ll encounter lots of jargon - the Loan-to-Value Ratio (LVR) being one of the most important concepts. LVR not only determines how much deposit you need but also plays a key role in your loan’s structure and the costs you’ll need to consider along the way. This guide simplifies everything you need to know about LVR, from how it’s calculated to how it affects your path to homeownership. Along the way, we’ll share practical tips to help you manage your LVR more effectively and highlight how Horizon Bank’s local experts can guide you every step of the way. What is the Loan-to-Value Ratio (LVR)? LVR stands for Loan-to-Value Ratio. It’s a way lenders assess the risk of providing a loan by comparing the amount you want to borrow against the value of the property you wish to purchase. How is LVR Calculated? The formula for calculating LVR is straightforward: LVR = (Loan Amount ÷ Property Value) × 100 For example, if you’re buying a property valued at $500,000 and need to borrow $400,000, the LVR would be calculated as follows: (400,000 ÷ 500,000) × 100 = 80% LVR This means the loan equates to 80% of the property’s value. Why Do Lenders Care About LVR? Lenders use LVR to gauge how much risk a loan carries. Generally, the lower your LVR, the lower the risk for the lender. Borrowing more with a higher LVR increases the lender’s exposure, which may lead to additional costs for the borrower, such as Lenders Mortgage Insurance (LMI). Why is LVR Important for First Home Buyers? For first home buyers, understanding LVR is essential because it directly affects how much deposit you’ll need and influences the overall affordability of your home loan. Impact on Deposit Your LVR determines the minimum deposit you’ll need to secure a home loan. Lenders typically require at least a 20% deposit for an LVR of 80% or lower. If you borrow more than 80% of the property’s value, your LVR rises, and you may be required to pay for LMI, discussed further below. For instance: LVR of 80% means a 20% deposit is required. On a $500,000 property, this would equal $100,000. LVR of 90% would mean a smaller deposit of $50,000 on the same property, but would likely result in LMI and higher monthly repayments. How LVR Affects Borrowing Power LVR can also influence your borrowing capacity and the types of loans you qualify for. A lower LVR generally places you in a stronger financial position, making it more likely you’ll secure favourable terms, such as lower interest rates. A higher LVR may limit your options and add costs. The Relationship Between LVR and Lenders Mortgage Insurance (LMI) LMI is a type of insurance that protects the lender, not you, in case you’re unable to repay your loan. It’s typically required when your LVR exceeds 80%. How LMI Works Higher LVR loans are considered a bigger risk. To mitigate this risk, lenders require borrowers to contribute to LMI. The cost of LMI depends on the loan size and your LVR percentage. The higher your LVR, the more expensive your LMI will be. Example of LMI CostsOn a $500,000 property with an LVR of 90% (loan amount of $450,000), LMI could add thousands to your upfront costs or be capitalised (added to your loan). Tips for Managing Your LVR Effectively Reducing your LVR before applying for a loan can lead to better outcomes, from avoiding LMI to securing competitive interest rates. Here’s how you can do it effectively: 1. Save for a Larger Deposit The simplest way to lower your LVR is to save for a bigger deposit. This not only brings down your borrowing amount but also puts you in a stronger negotiating position for loan terms. 2. Consider the Property Value Carefully Choose a property within your budget to keep LVR manageable. Overextending yourself on a higher-value property could push you into a higher LVR bracket, increasing costs. 3. Leverage First Home Buyer Incentives Take advantage of Australian government grants or programs, such as the First Home Owner Grant, to help boost your deposit and lower your LVR. 4. Seek Guidance from a Local Lender Working with Horizon Bank’s expert team ensures you are informed on your loan LVR, you understand your borrowing capacity, and can navigate the first home loan process with confidence. 5. Build Financial Resilience Maintain a strong financial profile by managing debts and showing consistent savings habits. This can highlight your reliability as a borrower and may help during the approval process. 6. Explore Smart Repayment Options Consider strategies like making fortnightly repayments instead of monthly to pay off your loan faster and gradually reduce your LVR over time. Take Control of Your LVR with Horizon Bank Understanding the Loan-to-Value Ratio (LVR) is crucial for first home buyers. From determining your deposit size to influencing loan approvals and additional costs like LMI, LVR affects nearly every aspect of your home loan experience. At Horizon Bank, we’re here to make the process simpler and more transparent. Our local, customer-first approach ensures you’ll always have access to relevant information from people who understand the Australian market and your unique situation. Horizon Bank has a branch network spanning the NSW South Coast and Illawarra. Horizon Bank branch locations: Albion Park, Bega, Bermagui, Berry, Merimbula, Moruya, Nowra, Thirroul, Ulladulla & Wollongong. Your first home is closer than you think! Speak to one of our local lending experts today to better understand your LVR and discover how Horizon Bank can help you achieve your homeownership goals. Contact us now or visit our First Home Buyer Loan page for more information. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank. 

Becoming a guarantor for a loved one’s home loan can be a meaningful way to help them achieve their dream of home ownership. However, it’s a significant financial responsibility that requires careful consideration. To help you prepare, we’ve put together a guide covering everything you need to know about being a guarantor, from eligibility and responsibilities to financial planning and how to exit the role when the time comes. At Horizon Bank, we’re committed to ensuring that both borrowers and guarantors can make informed decisions, backed by local support and expertise. Who Can Be a Guarantor? A guarantor is someone who agrees to provide security for part or all of a borrower’s home loan, helping the borrower secure a property or access better loan terms. But who qualifies as a guarantor? Eligibility Criteria Guarantors are typically individuals with a stable financial history. This often includes: Having a steady income or sufficient assets. Owning property (outright or with an existing mortgage). Possessing good credit. Lenders will assess your overall financial standing to ensure you can act as a guarantor without putting yourself at financial risk. Common Relationships Most guarantors are family members or close relatives. Parents frequently act as guarantors for their children to help them get onto the property ladder. Occasionally, other trusted individuals, like extended family, can also step in, provided they meet the eligibility criteria. Financial Considerations Before Saying Yes Becoming a guarantor is a big decision, and evaluating your financial situation is essential before agreeing to help. While your intentions may be to support a loved one, it’s important to ensure that the role won’t strain your finances. Assess Your Financial Stability Before agreeing to anything, take an honest look at your financial picture: Do you have existing debts, such as a mortgage, personal loan, or credit card obligations? Can you comfortably handle potential financial pressure if the borrower faces difficulties repaying the loan? How might becoming a guarantor affect your ability to secure credit in the future? Potential Impact on Your Borrowing Power Be prepared for the possibility that being a guarantor could impact your eligibility to take on new loans or financial commitments of your own. Lenders often consider a guarantor’s obligations part of their overall financial responsibilities, even if the loan doesn’t directly affect your finances. Understanding Your Responsibilities as a Guarantor While being a guarantor can be rewarding to help someone you care about, it’s important to understand exactly what you’re agreeing to. Clear expectations upfront can help avoid misunderstandings down the road. Guaranteeing the Loan When you act as a guarantor, you’re offering security to the lender to reduce their risk. This will involve: Using your property as security. Agreeing to guarantee a portion of the loan amount. It’s crucial to understand that you won’t be making regular payments on the borrower’s loan. However, you will need to step in and cover missed payments if the borrower defaults entirely. Managing Risks Before signing any agreements, it’s a good idea to: Seek independent legal or financial advice to fully understand the terms. Discuss repayment plans and contingencies with the borrower to ensure everyone is on the same page. How to Exit Your Role as a Guarantor Many potential guarantors worry about being locked into this role indefinitely. Fortunately, there are clear pathways to exiting the guarantor role once the borrower has reached certain milestones. Conditions for Being Released Most lenders release guarantors from their obligations once the borrower reaches an 80% loan-to-value ratio (LVR). This means the borrower has repaid enough of their loan or the property has gained sufficient value to reduce the lender’s risk. Steps to Exit Once the conditions are met, you can formally apply to be removed as a guarantor. You may need to provide a request to the lender for a release of the guarantee. Lenders usually handle these requests efficiently, but it’s worth staying in touch with the borrower and regularly monitoring their progress. Supporting a Loved One with Confidence Becoming a guarantor is a tangible way to help someone you care about achieve their dream of home ownership. However, entering the arrangement with a full understanding of your responsibilities and the potential financial implications is essential. By planning ahead and seeking experts' support, you can confidently fulfil this role. Talk to Horizon Bank Are you thinking about becoming a guarantor? The team at Horizon Bank is here to help. We’re committed to providing clear, personalised guidance to both borrowers and guarantors, ensuring everyone feels supported and informed throughout the process. Visit us at your nearest local branch at Albion Park, Bega, Bermagui, Berry, Merimbula Moruya, Nowra, Thirroul, Ulladulla or Wollongong or contact us online. Together, we can help you take the next step with confidence. The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant General Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank.