Does anyone have any experience with the St George 'Family Pledge' option

Does anyone have any experience with the St George 'Family Pledge' option?

It was suggested to use but I don't really understand it. It reduces our ratio thing, which means we don't have to pay the insurance thing (very technical, I know). It uses the equity on our parents home as 'added security'. What does THAT mean? Is it used as a deposit? Does it increase our borrowing power?

And, if our parents own their homes outright, and have no mortgage, do their houses have equity? (that question probably proves how much I don't know about real estate, but anyway :p). I mean, it says equity is the difference between the outstanding balance of a mortgage, and the property value. If theres no mortgage, is there no equity? Or is the equity the whole value of the property. Not that I would 'borrow' against the whole of our parents 'equity' (or maybe :think: lol). Just wondering.

And how different is this froom a usual home loan where you bring cash as a deposit and borrow the rest straightout from the bank? How much risk does it involve on the 'guarentors' part?

Ugh. This is so confusing.

(Yes, I know, go back to the bank, talk to them. Well they're shut on a Sunday and I am impatient.)

I dont know about this particular product but it sounds very similar to a number of others.

Equity - yes if the property has no mortgage it still has equity - the equity is as youy suggested:

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Or is the equity the whole value of the property.

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Risk to guarantor - if you are unable to make your repayments, for any reason, the guarantor is required to make repayments on your behalf. If repayments are still not met and the bank has to foreclose on the mortgage and sell your house, the guarantors are responsible for paying the bank any money that the bank has lost on the sale of your house - if that means that the guarantors have to sell their house as they do not have the cash then that is what has to happen. The bank is using the guarantors house as "insurance" for your high risk loan - that way they still get their money no matter what.

I found the Product Specification yay! :)

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if you are unable to make your repayments, for any reason, the guarantor is required to make repayments on your behalf. If repayments are still not met and the bank has to foreclose on the mortgage and sell your house, the guarantors are responsible for paying the bank any money that the bank has lost on the sale of your house - if that means that the guarantors have to sell their house as they do not have the cash then that is what has to happen.

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That would be up to the amount that they specify:

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from http://www.partners.stgeorge.com.au/...ion%284%29.pdf
The guarantee is structured so that the guarantor's liability is limited to a specified amount and, at the request of either the borrower or the guarantor at any time during the loan term, they can ask to be released from the guarantee.
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This structure will provide the guarantor with certainty of the value of their guarantee and allow them to have their property released much earlier than would normally happen.

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Ok, just to clear a couple of things up.

The amount of money you owe the bank is the "loan" or the "debt".
The "mortgage" refers to the legal instrument that the bank holds over your property, it's basically the document that the bank uses to establish the property as "security" against the debt (their security, not yours).
So with the guarantee, the bank will draw up a (probably limited) mortgage against your parents, as security against the event that both you and your parents are unable to pay off the debt.
"Equity" by the way refers to the amount of (not encumbered by debt) value in a property. So if the real value of the property was $500K, and you had a loan on it for $200K, then there is $300 "equity" still in the property. So if you parent's house is worth $500K and there is no debt on it, then the equity in it $500K. EXCEPT the bank valuation is usually lower than the market price to allow for variations in the market.

Thanks MD :) Mum seemed to know what I was on about, so heres hoping our meeting with the bank goes well next week!!!!!

Good luck with it!!!