Guarantor loans
A family guarantee lets you buy with a small deposit or none, and skip LMI, using a portion of a parent’s home equity as extra security. Your Sydney mortgage broker, 35+ lenders. $0 cost.
Saving a full 20% deposit is the biggest hurdle for most buyers. A guarantor home loan gets you around it. A family member, usually a parent, uses a portion of the equity in their own home as extra security for your loan. It is not a cash gift, and they make no repayments, they simply give the lender more security so you can buy sooner.
That extra security brings your effective loan to value ratio down to 80% or below, so you skip lenders mortgage insurance and can borrow up to 105% of the price, enough to cover stamp duty and costs too. You still take out and repay the whole loan yourself. We compare 35+ lenders, structure it the right way, and it costs you $0.
The guarantee is almost always a limited one, capped to the gap to a 20% deposit rather than your whole loan, and it can be released once you build enough equity. We explain all of that below, including how it compares to the 5% Deposit Scheme.
With a family guarantee you can buy with little or no deposit of your own. The limited guarantee brings your effective loan to value ratio down to 80%, so you skip LMI. Here is roughly how it looks at different price points if you buy with no deposit.
| Purchase price | Guarantee (to reach 80% LVR) | LMI you avoid |
|---|---|---|
| $600,000 | ~$120,000 | ~$25,000 |
| $700,000 | ~$140,000 | ~$28,000 |
| $800,000 | ~$160,000 | ~$33,000 |
| $900,000 | ~$180,000 | ~$37,000 |
| $1,000,000 | ~$200,000 | ~$42,000 |
Estimates only, based on buying with no deposit of your own, so the guarantee covers the gap to an effective 80% loan to value ratio. If you have some savings to put in, the guarantee needed is smaller. Your guarantor’s exposure is capped at that limited amount, not your whole loan, and you still borrow the full amount and make all the repayments. LMI avoided varies by lender and profile. Use our home equity calculator or book a free consult for your exact numbers.
Most guarantors are parents, but many lenders also accept other immediate family, like a grandparent or sibling, who owns property with enough equity. They do not need to own their home outright, just to have enough usable equity to cover the limited guarantee, which is usually the gap between your deposit and a 20% deposit. Importantly, you still take out and repay the whole loan, so lenders check you can comfortably afford it on your own.
It is worth being clear about what a guarantor is taking on. By pledging their equity, they are promising to cover the guaranteed portion if you cannot pay, and in the worst case their home could be at risk. A limited guarantee caps that to a set amount rather than your whole loan, which is why we always structure it that way, but it is still a serious commitment.
Because of that, lenders require your guarantor to get independent legal advice before signing, so they fully understand the arrangement. We make sure that happens, and we take the time to walk both of you through it. A guarantor loan should only go ahead when everyone is comfortable and your repayments sit well within your budget.
The government’s 5% Deposit Scheme now has no income cap and unlimited places, so many first home buyers can buy with a 5% deposit and no LMI without anyone going guarantor. A parent’s home never has to be part of the picture. For a lot of buyers, that is the simpler path.
A guarantor still has clear advantages in a few situations: when you are buying above the scheme’s price cap, when you want to borrow up to 105% to cover your costs as well as the price, or when you are not eligible for the scheme, for example if you have owned property before. It can also help you get in with an even smaller deposit than 5%.
The honest answer is that it depends on your situation, and often the scheme is worth using first. We compare both for you, lay out the trade-offs, and only suggest a guarantor where it genuinely serves you better. Our first home buyer page covers the scheme in full.
Estimate your deposit, your guarantor’s equity, and your repayments before you start.
Real answers for both borrowers and guarantors thinking about a family guarantee.
We compare 35+ lenders, structure a limited guarantee that protects your guarantor, set it up for early release, and get you in with a small deposit and no LMI. $0 cost.
MFAA member. 10+ years lending experience.
Explore the guides and services that pair with a guarantor loan.
Guarantor home loan specialists helping buyers across 220+ Sydney suburbs and Australia wide. Meet our team. Service regions: Sydney CBD, Sydney Central, Eastern Suburbs, Northern Beaches, North Shore, Inner West, Sutherland Shire, Hills District, St George, Canterbury-Bankstown, Western Sydney, Penrith.
