Achieve Your Property Goals Sooner with a Guarantor Loan
Navigate Your Way to Home Ownership with a Guarantor No Deposit Home Loan
Consider a guarantor home loan as a viable alternative to traditional deposit-saving, allowing you to overcome high property prices and secure your new home without the burden of mortgage insurance costs.
In Sydney’s property market, saving a 20% deposit can take a first home buyer close to a decade. A guarantor home loan is one way around that. Instead of waiting years to build enough savings, a family member uses the equity in their existing property to back your loan, and you can buy now.
But guarantor arrangements carry real obligations on both sides. The borrower takes on a 100% loan. The guarantor takes on legal liability. Understanding exactly how that works, and what can go wrong, is essential before either party signs anything.
This guide covers how guarantor home loans work in Australia, which lenders offer them, what the guarantor actually agrees to, and what both parties need to know before proceeding.
What Is a Home Loan Guarantor?
A home loan guarantor is typically a parent, sibling, or close family member who provides their own property as additional security for your mortgage. They don’t contribute cash toward the purchase, they don’t go on the title of your property, and they don’t share ownership. But if you stop making repayments, the lender can pursue them for the outstanding loan balance.
The guarantor’s property acts as a second security behind your purchase. That additional security gives the lender enough confidence to lend the full purchase price without a cash deposit. Your income still has to support the repayments on its own.
Every lender that offers a family guarantee accepts parents. Around a dozen lenders on our panel also accept siblings, about half a dozen accept grandparents or adult children, a few accept a spouse or de facto partner, and one or two will consider an in-law or a close non-family guarantor case by case.
To qualify as a guarantor, a person generally needs to:
- Own property in Australia with sufficient equity (lenders typically cap total lending against the guarantor’s property at 70% of its value)
- Have a clean credit history
- Be an Australian citizen or permanent resident
Lender requirements vary. Some assess the guarantor’s income and serviceability. Others rely solely on the property equity and do not require income verification from the guarantor at all.
Guarantor vs. co-borrower: These are not the same arrangement. A co-borrower shares ownership of the property and shares responsibility for repayments from day one. A guarantor takes on liability only if the borrower defaults, and has no ownership interest in the property being purchased. That distinction matters legally, financially, and for how the arrangement affects both parties over time.
How Does a Guarantor Help You Borrow More?
The Loan-to-Value Ratio (LVR) is the amount you borrow divided by the property’s purchase price. Standard home loans typically cap out at 80–95% LVR. Borrow above 80% LVR without a guarantor, and Lenders Mortgage Insurance (LMI) applies, an insurance premium that protects the lender if you default. LMI adds thousands of dollars to the cost of buying, sometimes tens of thousands on larger loans.
With a guarantor, the picture changes. The guarantor’s property provides security for the portion of the loan that would otherwise require a deposit. The lender’s effective risk is reduced to 80% LVR or below, which means LMI isn’t triggered, even if you’re borrowing the full purchase price.
This isn’t technically a “waiver” of LMI. LMI simply doesn’t apply because the guarantor removes the high-LVR risk that would normally activate it. The distinction matters for how borrowers should understand and explain the arrangement.
Can you borrow 100% with a guarantor?
Yes. With an eligible guarantor, the lenders on our panel that offer family guarantees will lend 100% of the purchase price, and most go to around 107% so that stamp duty and legal fees are covered too. A few go to 110%, and one lends the purchase price only. The guarantor’s property covers the security gap, removing the need for a cash deposit from the borrower.
A guarantor does not reduce your repayments. Repayments are set by the loan amount and the interest rate. A guarantor changes neither. What changes is your ability to buy now, rather than saving for years.
Interest rate advantage
This is an underappreciated benefit. Lenders typically price loans above 80% LVR at higher interest rates than loans at or below 80% LVR. A borrower taking a 90% or 95% LVR loan pays both LMI and a higher rate. A guarantor loan, by reducing the lender’s effective risk to 80% LVR, qualifies the borrower for the lower rate tier, the same rates available to someone who saved a full 20% deposit. Over the life of a $680,000 loan, the difference in rate alone can be material.
For a full breakdown of LMI costs and how the 80% LVR threshold works: what is LMI and when is it required
Wondering whether 100% borrowing is right for your situation? Read: can I borrow 100% of the property price
Guarantor Home Loans in Australia: Do Banks Accept Them?
Around 16 lenders on our panel of 52+ offer a family guarantee: about six banks and about ten customer-owned and non-bank lenders. One major bank withdrew family guarantees from the broker channel in 2020, and most non-bank lenders have never offered them, so the choice of lender is narrower than for a standard loan.
| What varies | Typical position across the lenders that offer it |
|---|---|
| Who can guarantee | Parents at every lender; siblings at around a dozen; grandparents and adult children at about six; a spouse or de facto partner at a few |
| Size of the guarantee | Usually capped at 20% of your property’s value plus costs (to about 27%), or 50% of the guarantor’s property value, whichever is less |
| Total lending against the guarantor’s home | Capped at about 70% of its value at most lenders |
| How much you can borrow | 100% of the price plus costs, to about 107% at most lenders; a few go to 110%; one lends the purchase price only |
| Investment purchases | Accepted at about five lenders, limited to a home you will live in at about five others, decided case by case elsewhere |
| Loan structure | Some write one loan with the guarantee attached; others split it 80/20 into two loans, which changes how the guarantee is released later |
| Guarantor income and age | Many lenders set no income or age test for a security-only guarantor; a few will not accept a guarantor whose only income is a government benefit; one caps guarantor age at 70 |
Which lender fits depends on who the guarantor is, whether you are buying a home or an investment, and how the guarantee will later be released. A split 80/20 structure, for example, means two loan accounts and a different release process from a single loan with the guarantee attached. Your broker walks through those differences before the application goes in.
Beyond the banks, around ten customer-owned and non-bank lenders on our panel also offer guarantor home loans. Eligibility criteria, guarantee structures, and release conditions vary considerably between lenders. Comparing across lenders rather than going directly to one bank is where a broker adds genuine value.
The 5% Deposit Scheme: a separate option
The Australian Government 5% Deposit Scheme (expanded 1 October 2025, no income caps, uncapped places) allows eligible first home buyers to purchase with a 5% deposit without paying LMI. This is a government guarantee rather than a family guarantee, and the two are distinct options. A guarantor loan and the 5% Deposit Scheme are different tools that suit different circumstances. For some borrowers, a family guarantor is the better fit; for others, the government scheme is simpler. A mortgage broker can help compare both.
5% Deposit Scheme explained | first home buyer loan options
The Risks of Being a Guarantor
Going guarantor on someone else’s home loan is a serious legal and financial commitment, not a formality. Before agreeing, any prospective guarantor needs to understand what they’re actually signing.
Liability if the borrower defaults
Family guarantees in Australia are typically limited guarantees. The guarantee covers a specific portion of the loan, generally around 20% of the property purchase price, which is the amount needed to reduce the effective LVR to 80%. If the borrower defaults, the lender’s recovery from the guarantor is capped at this limited amount. The lender cannot pursue the guarantor for the full outstanding loan balance.
In practice, this means the guarantor’s exposure is real but bounded. On a $680,000 purchase with a 100% loan, the guarantee amount is roughly $136,000, covering the portion that takes the loan from 80% to 100% LVR. If the borrower defaults and the property is sold, the lender recovers what it can from the property sale. Any shortfall within the guarantee amount can be sought from the guarantor. The guarantor is not responsible for the remaining loan balance beyond that.
This is still a real financial risk. Before agreeing, the guarantor should be clear on exactly how much they’re guaranteeing and under what circumstances that amount could be called.
Impact on the guarantor’s future borrowing
When the guarantor applies for credit in the future, they may be required to disclose any loans they’re guaranteeing. Some lenders will treat the guarantee as a contingent liability when assessing the guarantor’s borrowing capacity. This varies by lender. The guarantor should check with their own bank before entering the arrangement if they have near-term borrowing plans.
Credit record
Under Australia’s Comprehensive Credit Reporting (CCR) system, the borrower’s repayment history is reported against the borrower’s record, not the guarantor’s, so a missed repayment by the borrower does not normally show on the guarantor’s credit report. That protection is not absolute. Moneysmart warns that if the loan is called in and neither the borrower nor the guarantor can pay, the lender may record a default on the guarantor’s credit report. Guarantors should also expect to disclose the guarantee whenever they apply for credit of their own.
Relationship risk
Shared financial obligations can create real tension, particularly when the borrower’s circumstances change: job loss, relationship breakdown, health issues. The people who end up in the most difficult positions aren’t always those who default. They’re the ones who didn’t discuss the release plan upfront, or assumed the guarantee would quietly disappear without ever actively managing it.
Most lenders recommend that guarantors obtain independent legal and financial advice before signing. Some require it. A solicitor will walk through what the guarantor is agreeing to, confirm they understand the liability, and give both parties the chance to raise concerns before any documents are signed.
Guarantor Home Loans: Examples & Scenarios
Example 1: First home buyer with a parent guarantor
A first home buyer earning $90,000 a year wants to buy a $680,000 apartment in Western Sydney. They have $25,000 in savings, not enough for a 20% deposit ($136,000) and not enough for most standalone low-deposit products.
Their parents own their home, valued at $950,000, with $320,000 remaining on their mortgage. The parents’ equity is $630,000. The lender uses $136,000 of that equity as additional security for the buyer’s loan.
The buyer borrows the full $680,000. No LMI applies because the guarantor’s equity reduces the lender’s effective risk to below 80% LVR. The parents make no payments. They are called on only if the buyer defaults.
Once the loan balance is no more than 80% of the property’s current value, whether through repayments, property price growth, or both, the buyer can apply to have the guarantee released without LMI. If the apartment appreciates to $750,000 while the balance is still $580,000, the LVR is already 77.3% and the guarantee can be released. There is no need to wait until the balance drops to 80% of the original purchase price.
Example 2: A limited guarantee between siblings
Two siblings. The older one bought a home three years ago, now valued at $820,000 with $330,000 remaining, so their equity is $490,000. The younger one is a first home buyer with stable income but minimal savings.
The younger sibling wants to buy a $560,000 property. The lender uses $112,000 of the older sibling’s equity (covering the deposit gap to reach 80% LVR) as a limited guarantee. The buyer borrows the full $560,000. The older sibling’s own property and loan are not affected day-to-day. Once the buyer’s LVR reaches 80%, the guarantee is released.
Model your own scenario
The numbers vary depending on the lender, the property value, and your guarantor’s equity position. Use our guarantor home loan calculator to estimate borrowing capacity, the equity your guarantor needs to provide, and the timeframe to release.
Comparing a guarantor loan against other deposit options? Read: gift vs guarantor for home loan deposit
Key Questions About Guarantor Home Loans
Does a guarantor reduce my loan repayments?
No. A guarantor does not reduce repayments. Repayments are calculated from the loan amount and interest rate. A guarantor affects neither. A $680,000 loan at 6.2% per annum carries the same monthly repayment whether you have a guarantor or not. The guarantor’s role is to enable the loan in the first place, not to reduce what you pay.
When can a guarantor be released?
The guarantee can be released once your loan balance is at or below 80% of the property’s current value, without requiring LMI. This is confirmed through a current property valuation. If the property has increased in value since purchase, your LVR may already be below 80% even if your loan balance hasn’t dropped significantly.
The guarantee doesn’t end automatically. You need to formally apply through your lender or mortgage broker, who will request a valuation and confirm the LVR. Making additional repayments accelerates the process, but property growth can do a lot of the work too.
Can I use a guarantor as a first home buyer?
Yes. First home buyers are the most common users of guarantor loans, because the obstacle is usually the deposit rather than the ability to meet repayments. Before committing to a guarantor arrangement it is worth comparing it against the low-deposit options available to first home buyers, including the 5% Deposit Scheme covered above, since the right choice depends on your savings, your borrowing capacity and whether a suitable guarantor is available.