Services · Buying
Guarantor & Family Guarantee Home Loans
If your income is fine but the deposit is the thing holding you back, a family guarantee can be the difference between buying now and saving for another three years. A parent uses equity in their home as extra security, and you borrow with a smaller deposit.
Here's the simple version. A guarantor, usually a parent, lets the lender use some of the equity in their property as extra security for part of your loan. That lifts your total security, drops your loan to value ratio, and often gets you under the 80% mark where lenders mortgage insurance kicks in. Your guarantor doesn't hand over any cash. They're backing a capped slice of the loan, not the whole thing.
What a guarantor is actually on the hook for
This is the part I never let people gloss over. A good guarantor arrangement uses a limited guarantee, capped at a set dollar amount, usually around 20% of the purchase price plus buying costs. That cap is all your guarantor is liable for, not your entire mortgage. I'll always structure it this way and show your parents the exact number in writing before anyone signs.
Limited, not unlimited
An unlimited guarantee exposes your guarantor to the full loan. I don't set loans up that way. Ask any broker to confirm in writing that the guarantee is limited to a fixed amount.
Who can be a guarantor
- Usually a parent, but some lenders accept siblings, grandparents or adult children.
- They need enough usable equity in their own property.
- Most lenders want them under about 65, with a clear reason if they're retired.
- They'll get their own legal advice before signing, which lenders now insist on.
Getting the guarantor released
The goal is to remove your guarantor as soon as it's safe to. Once your property has grown in value and your loan balance has dropped enough that you're under 80% on your own, we refinance or revalue and release them. For a lot of my clients that's three to five years, sometimes sooner in a rising market. Want to see what you could borrow first? Try the borrowing power calculator.
Thinking about a family guarantee?
Bring your parents into the first call and I'll walk everyone through the numbers and the risks.
Frequently asked questions
Does my guarantor need to give me money?
No. They're offering equity in their property as security, not cash. They only ever have to pay if you default and the guaranteed portion can't be covered, which is why I keep the guarantee capped and push to release them early.
Can I avoid LMI with a guarantor loan?
Often, yes. Because the guarantee lifts your total security below 80%, many buyers skip lenders mortgage insurance entirely. That can save thousands. It depends on the lender and your numbers, so let's check yours.
What if I can't make the repayments?
The lender works with you first, the same as any home loan. Your guarantor is only called on as a last resort, and only up to the capped amount. Setting the loan up with a sensible buffer is how we avoid ever getting there.
Important information
This information is general in nature and does not take your personal objectives, financial situation, or needs into account. It is not credit assistance or a recommendation to enter into any particular credit contract. Consider whether it is right for you and seek advice before acting. Lending is subject to a lender's eligibility and approval criteria. Terms, conditions, fees, and charges apply.
Greenwood Finance · ABN 23 671 049 693 · Credit Representative No. 551942.
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