Home loan guide
How a family guarantee can help with a deposit, what you still need to afford and the risks for the family member providing security.
A guarantor home loan may let you buy with little or no deposit, without your family handing over cash. The lender uses part of the value in their property as extra security. You still need to show that you can afford the whole loan from your own income. Some lenders may consider the purchase price plus eligible buying costs, subject to their limits and both properties being acceptable.
Want to see the numbers first? Jump to our guarantor home loan calculator.
A family guarantee can help when saving the deposit is the obstacle. This is how it helped Zhara.
Zhara, a first-time home buyer from Brisbane, was facing a common challenge. Like many young Australians, she was finding it tough to save for a deposit while also paying rent.
Then, Zhara discovered guarantor home loans. With her parents acting as guarantors, she was able to secure a loan for 105% of the property value. This opened the door to homeownership for her, without the need for a large deposit.
The advantages for Zhara were instant and significant:
– No More Rent: She could stop paying rent and start investing in her own property.
Buying sooner: family security helped her proceed without waiting to save a large deposit.
– Saving on Insurance: She saved thousands of dollars by avoiding Lenders Mortgage Insurance.
The guarantee helped Zhara cover the deposit gap and avoid LMI. The lender still needed to assess her ability to repay the loan.
Check who the lender will accept and how much property equity they can offer.
Usually a parent or another close relative accepted by the lender. The lender checks property ownership, available equity and the guarantor's circumstances. Retired parents may be considered. See who can be a guarantor.
While many people can act as a guarantor, there are some exceptions:
– Friends or Distant Relatives: These individuals typically can’t act as guarantors.
Retirees: retirement does not automatically rule someone in or out. Check the lender's rules and the proposed guarantor's circumstances. Read who can be a guarantor.
Even with a guarantor, some lenders may require you to show that you have been saving money, usually at least 5% of the purchase price.
This is known as genuine savings. Requirements vary: some lenders need a savings history, while others may accept different evidence. Check the cash needed for buying costs as well as any deposit requirement.
Understanding these requirements can help you determine if a guarantor home loan is the right choice for you. If you’d like to know more, contact us for a free assessment.
A family security guarantee can help you buy when the deposit is short. It does not add your parents' income to the application or increase what you can afford to repay.
Start with the repayment assessment, then check the deposit shortfall.
Borrowing power refers to the maximum amount that a lender is willing to loan you.
It’s calculated based on several factors, including your income, expenses, existing debts, and the number of dependents you have.
There is no reliable rule that a bank will lend 5 or 6 times your salary. Income, dependants, living costs, debts and credit card limits all affect the answer. Start with how much home you can afford, then work out whether a guarantee could cover the deposit gap.
If the bank assesses that you can afford a $450,000 loan, a family guarantee does not turn that into an $840,000 approval. You need enough accepted income for the full amount borrowed, including any financed buying costs.
To find out what your borrowing power is, get in touch with our team or call on 1300 088 065 and we can let you know.
A guarantor may let you borrow a larger share of the purchase price when your own income already supports that loan. That is different from increasing your income-based borrowing capacity. Read does a guarantor increase borrowing power? for the distinction.
A smaller cash deposit: some lenders may consider up to 105% of the purchase price, including eligible costs. The amount still depends on your income, the security available and the lender's policy.
– Avoiding LMI: Lenders Mortgage Insurance (LMI) is typically required when you borrow more than 80% of the property’s value. However, with a guarantor, you can avoid this cost, which can add up to thousands of dollars.
Interest rates: additional security may affect the lender's pricing, but there is no automatic guarantor discount. Compare the actual rate, comparison rate, fees and total loan amount.
Check to see if you are eligible for a home loan
Use the calculator to explore your household income, debts, deposit and proposed family support. It gives a planning estimate, not approval. A family guarantee does not make an unaffordable loan affordable.
Before relying on the result, we would check the lender's income assessment, both properties and the guarantee amount. Compare the 5% Deposit Scheme too, if you may be eligible.
The application involves both the buyer's finances and the family property offered as security. These are the main steps.
Before applying, both the borrower and guarantor must meet lender requirements:
Guarantor: a family member and property accepted by the lender, with enough available equity. The lender will review existing debt and the proposed guarantor's circumstances. Independent legal advice helps them understand the guarantee before signing.
Not all lenders offer the same guarantor home loan options. Compare:
Maximum loan amount: check the share of the purchase price and eligible costs the lender will consider. You must still meet its income and expense assessment.
LMI exemptions: Some lenders waive Lenders Mortgage Insurance, saving you thousands.
Interest rates and fees: Even small differences can affect long-term repayments significantly.
Lenders require proof to approve your loan:
Income statements and payslips: This confirms your ability to meet monthly repayments.
Evidence of savings or genuine savings: Lenders want to see you manage your finances responsibly.
Guarantor’s property ownership and equity details: The guarantor’s property must have sufficient value to cover the guarantee.
Once your documents are ready:
Fill in the loan application carefully: Errors can delay approval or cause rejections.
Include all borrower and guarantor details: Complete information allows a smoother assessment.
Prepare for lender queries or extra documentation: Lenders may request clarification or additional proof.
The lender will:
Assess your income, expenses, and debts: This determines how much you can safely borrow.
Conduct a property valuation: The property value affects the loan-to-value ratio (LVR).
Determine the loan-to-value ratio (LVR): The LVR impacts borrowing limits and the need for LMI.
After approval, settlement occurs:
Funds are released to complete your property purchase: This final step secures ownership of your new home.
The guarantee can be released only after the lender formally approves it. An LVR of 80% or less may help, but regular repayments alone do not automatically remove the guarantee.
I would compare the same property, the cash you contribute and the whole loan you need to repay. A guarantor can change the deposit requirement; it does not provide a repayment subsidy.
A 20% deposit commonly avoids LMI on a standard loan, but it is not a universal minimum. Some lenders consider smaller deposits with LMI, an eligible LMI waiver or the Australian Government 5% Deposit Scheme.
On an $800,000 property, 20% is $160,000 and 5% is $40,000, before buying costs. A guarantor arrangement may reduce the cash deposit further. Check the family's risk and the larger repayment before choosing it.
Your income has to support the full debt under either option. With a 20% deposit on an $800,000 home, the base loan is $640,000. With no cash deposit it would be $800,000 before costs. A lender considering an $840,000 loan must assess your ability to repay $840,000.
LMI is commonly payable above 80% LVR unless an exception applies. A suitable guarantee can help avoid it, but so can an eligible government scheme or professional waiver. Obtain an actual lender quote instead of relying on a fixed premium range; our LMI calculator is an estimate.
The RBA's July 2026 data reports an average rate of 6.16% p.a. on new owner-occupier principal and interest loans, including fixed and variable loans. This is a market reference, not an available guarantor offer or a prediction of your rate.
Using 6.16% for a simple comparison over 30 years, principal and interest repayments would be $3,903 a month on $640,000, $4,879 on $800,000 and $5,123 on $840,000. These examples exclude fees and assume the rate stays unchanged. Borrowing more can mean paying more each month even if the rate is competitive.
| Feature | Standard home loan | Guarantor home loan |
|---|---|---|
| Deposit | 20% commonly avoids LMI; lower deposits may be available with LMI or an eligible exception. | May allow little or no cash deposit if family property covers the gap. |
| Amount you can repay | Assessed using accepted income, expenses and debts. | The same affordability check applies. Guarantor income is not added. |
| LMI | May apply above 80% LVR; scheme and waiver exceptions exist. | May be avoided where the lender accepts sufficient extra security. |
| Rate and fees | Depends on the product, loan size and assessed risk. | No guaranteed discount. Compare the written offer and the total debt. |
| Family property | Normally not part of the security. | The agreed guarantee can put the family property at risk until formally released. |
For lender context, Commonwealth Bank describes family property as additional security, while St George offers Family Pledge. Their conditions and guarantee documents matter. Our guarantor versus 5% Deposit Scheme guide compares the main alternatives.
A guarantee can put your property at risk. Read the guarantee documents with an independent solicitor before agreeing.
As a guarantor, you’re essentially providing a safety net for the lender. Here are the key responsibilities:
Loan liability: if the borrower defaults, the lender may enforce the guarantee under its terms. Check the guaranteed amount and whether interest, fees or enforcement costs can be added. It is not necessarily a commitment limited to missed monthly repayments.
– Legal Obligations: You’ll need to sign a contract, agreeing to the terms and conditions of the guarantor home loan. It’s essential to read and understand this document before signing.
While being a guarantor can help a loved one secure a home loan, there are potential risks involved:
– Financial Risk: If the borrower defaults on their loan, you could be responsible for repaying a large amount of money.
– Credit Score Impact: If the borrower defaults and you’re unable to cover the repayments, this could negatively impact your credit score.
– Property Risk: In some cases, if the borrower defaults, the lender could potentially sell your property to recover the loan amount.
Allow for independent legal advice and any lender, valuation, registration or discharge costs. Ask for the current fees in writing. A guarantee can also restrict the family's ability to sell, refinance or borrow against their property. Read the risks of going guarantor before signing.
Get independent legal advice on your liability and exit conditions, and financial advice on how the commitment fits your own plans.
Would you like to learn about your situation?
A lender can release a guarantee when its requirements are met. Ask how this would work before the loan starts.
A guarantor can typically be removed from a home loan under the following conditions:
– Increased Property Value: If the value of the property has increased, this could provide enough equity to remove the guarantor. This often depends on market conditions and the location of the property.
– Reduced Loan Amount: If the borrower has been making regular repayments and has significantly reduced the loan amount, the lender may agree to remove the guarantor.
– Improved Financial Circumstances: If the borrower’s financial circumstances have improved – for example, they’ve received a promotion or paid off other debts – the lender may agree to remove the guarantor.
The process for removing a guarantor typically involves the following steps:
– Property Valuation: The lender will need to conduct a valuation of the property to determine its current market value.
– Loan to Value Ratio (LVR) Assessment: The lender will calculate the Loan to Value Ratio (LVR) – the amount of the loan compared to the value of the property. If the LVR is 80% or less, the lender may agree to remove the guarantor.
– Borrower Assessment: The lender will assess the borrower’s financial circumstances to ensure they can manage the loan repayments without the guarantor.
Ask the lender to confirm the release in writing. A lower loan balance or higher property value does not remove the guarantee by itself.
Read More: Removing a Guarantor from a mortgage
Cherise also used family property to help with a deposit shortfall.
Cherise, a young professional from Sydney, had been dreaming of owning her own home. However, the high property prices in her city made it difficult for her to save for a deposit.
Cherise's parents agreed to provide security. Her loan covered 105% of the property value, including eligible buying costs.
The advantages for Cherise were substantial:
– Quick Home Ownership: With a guarantor home loan, Cherise was able to buy a property much quicker than she would have been able to otherwise.
– Saving on Insurance: By avoiding Lenders Mortgage Insurance, Cherise saved a significant amount of money.
Buying costs: lending above the purchase price depends on the lender's permitted costs and affordability assessment. A guarantee is not a general allowance for furniture or holidays.
The useful lesson is that family property may cover a deposit gap. Any extra borrowing needs a permitted purpose and affordable repayments; it should not be treated as spending money.
A guarantor home loan lets a family member use their property equity as security for your mortgage. This allows borrowers to buy with little or no deposit. It can also help avoid Lenders Mortgage Insurance (LMI).
Usually a parent or close relative accepted by the lender. The lender checks property ownership, available equity and the guarantor's circumstances. Retirement does not automatically rule someone out. Read who can be a guarantor.
You provide additional security under a guarantee. If the borrower defaults, the lender may enforce it. Check the stated limit and whether interest, fees or enforcement costs can be added; the secured property may be at risk.
It may help you buy with little or no deposit and avoid LMI. Your income still needs to support the whole loan. A rate discount is not guaranteed, so compare the actual written offer with your other options.
The guarantor agrees to the obligations in the guarantee documents. If the borrower defaults, the lender may enforce the guarantee and the secured property can be at risk. Independent legal advice should explain the limit, costs and exit conditions.
Some lenders may consider little or no cash deposit when acceptable family security covers the gap. Savings history, buying costs and affordability requirements still vary by lender.
The lender uses the home you buy and agreed security over a family member's property. Some lenders may consider the purchase price plus eligible costs, subject to limits. You repay the whole loan from your own accepted income.
The lender must formally approve the release. An LVR of 80% or less may help, but valuation, income and other conditions can still apply. Ask for written confirmation rather than assuming a repayment removes the guarantee.
Guarantors are released when the borrower meets the lender’s conditions, often when LVR is below 80%. Property value increases or lump-sum repayments can speed this up. Once released, the guarantor has no further obligations.
A co-applicant is a borrower responsible for the loan. A family security guarantor offers additional property security under a separate guarantee. Adding someone as a borrower is a different commitment and must be assessed separately.
It depends on the lender, property ownership and loan structure. Do not assume a spouse can provide a family guarantee merely because they have equity. Ask the lender and obtain independent legal advice.
A guarantee may let you borrow a larger share of the purchase price, but it does not increase the amount your income can support. Some lenders consider up to 105% including eligible costs, subject to their assessment.
Yes, but the guarantee may need to be released first. The lender might require the borrower to refinance or provide alternative security. Always check conditions with your bank.
If the guarantor sells, the guarantee must be reassessed. The borrower may need to pay down the loan or take LMI. The guarantee cannot remain once the guarantor’s property is sold.
Once released, the guarantor has no responsibility for the loan. This doesn’t require the full loan to be repaid. The timing depends on meeting lender conditions.
Previous ownership does not automatically rule out a guarantor loan. Check the lender's rules for your current property holdings and the purpose of the purchase; eligibility differs between lenders.
Separation does not automatically release the guarantor or either borrower. Your solicitor needs to address the property settlement, and the lender must separately approve any loan or guarantee release. Selling can leave a shortfall after costs.
Usually, a guarantor is a parent or close relative with property equity. Open discussion about risks is essential before they commit. Most lenders require both parties to seek legal and financial advice.
Possibly, if your income supports the repayments and the lender accepts the proposed guarantee. It can help with a deposit shortfall, but cannot replace income that the lender needs for affordability.
You provide agreed property security under a guarantee. Your liability follows that document, and the property can be at risk if the loan is not repaid. Get independent legal advice before deciding whether to sign.
A guarantor loan may help a buyer with enough income but insufficient savings. Compare the deposit benefit with the larger loan and the family's risk.
We can compare your savings, a family guarantee and any government scheme you may qualify for. Then we can explain the likely loan amount, repayments and what your family would be putting at risk.
Start with your price range, income and savings, plus a rough value and loan balance for the proposed guarantor's property. Get a Free Assessment or call 1300 088 065.
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Information checked on 12 September 2026. Confirm the conditions that apply to your circumstances before committing.
