Guarantor Home Loans: How Family Can Help You Buy Sooner
How guarantor loans work in Australia, the risks and benefits for both parties, and how Perth buyers use them to get into the market faster.
If your deposit is small but your income is strong, a guarantor loan could be your fastest path to home ownership. Here’s how they work — and what both sides need to understand.
What is a guarantor loan?
A family member (usually a parent) offers a portion of their property equity as additional security for your home loan. This can eliminate the need for Lenders Mortgage Insurance and reduce the deposit you need.
How it typically works
- You apply for a home loan with a small deposit (sometimes as little as 2–5%)
- Your guarantor offers a limited guarantee — usually enough to cover the gap between your deposit and 20% of the purchase price
- The lender takes a second mortgage over a portion of the guarantor’s property
- Once you’ve built enough equity (usually by paying down the loan or property growth), the guarantee is released
Who can be a guarantor?
Most lenders require the guarantor to be:
- A close family member (parent, sibling, in some cases grandparent)
- An Australian property owner with sufficient equity
- Able to demonstrate they can meet their own commitments with the guarantee in place
Benefits
- Buy sooner — don’t wait years to save 20%
- Avoid LMI — which can be $10,000–$30,000
- Borrow more — your borrowing power may increase
- Guarantor doesn’t hand over cash — they provide security, not money
Risks to understand
- Guarantor’s property is at risk if you default — both parties must understand this
- The guarantee limits the guarantor’s own borrowing until it’s released
- Relationship strain — finances and family don’t always mix well
Most lenders require guarantors to get independent legal advice before signing, and we encourage it.
When the guarantee gets released
Typically when your loan-to-value ratio drops below 80% — either through repayments, property value growth, or a combination. We proactively review this for every guarantor client.
Ask us about guarantor options →
General information only. Both borrower and guarantor should seek independent legal and financial advice.