The basics of guarantor home loans

Saving for a home deposit can be slow going, and you might be looking for ways to speed things up. An option you may have to get you into your own home faster is a Family Guarantee – it’s a helping hand from a family member, who agrees to be your home loan guarantor.

How does a Family Guarantee work?

Our Family Guarantee is structured as two separate loans. The first loan is secured by the home you buy, and is for the majority of that property’s value. The second, smaller loan is considered to be the guarantor loan. It’s secured by the house you’re purchasing, as well as a portion of the equity in your guarantor’s property.

You need to make the minimum monthly repayments on both loans yourself. Keep in mind that your guarantor will be liable for the part of the loan that’s secured against their property if you’re unable to make the repayments – but they don’t have to be liable forever. Once you’ve paid off the second loan, you can apply to remove the guarantee. You could even pay extra off the smaller loan if you want to release the guarantor’s property as soon as possible. Note that early loan repayment fees may apply on some home loans.

What are the requirements of a Family Guarantee?

  • You need to buy the property to live in, and not own any other property
  • Your guarantor needs to be an immediate adult relative (your mum, dad, brother, sister, grandparent, spouse, de facto partner or child)
  • If your guarantor has a home loan with another lender, they’ll need to move their loan to us – see more about what it means to refinance.

Benefits of a Family Guarantee

  • You can spend less time saving for a deposit, so you can get on the property ladder sooner
  • You can borrow up to 100% of the property’s purchase price plus applicable fees without having to pay Lenders' Mortgage Insurance (LMI) – which is a cost you would normally have to factor into your budget if you were borrowing more than 80% of the property’s purchase price.

For example
Let’s say you’ve got a $50,000 deposit and you’d like to buy a house that’s worth $500,000. This would mean that your deposit is 10% of the property’s purchase price, and you’d have to pay LMI on the remaining 10%. Instead of proceeding with your 10% deposit alone, a guarantor could offer $50,000 (the remaining 10%) of their home equity, making up 20% of your home loan security – saving you that LMI.

Similarly, a guarantor could offer $100,000 of their home loan equity to be used as security on your loan, meaning you wouldn’t need a deposit at all.

See our home loan fee calculator.

Before you apply for a Family Guarantee

There are many things to consider, and you and your potential guarantor can sit down and talk about them face to face with a Home Lending Specialist. They can meet at a time and a place that suits you – even weekends and evenings. They’ll also be able to help you with next steps to apply. It’s also important that your guarantor gets independent financial and legal advice so they understand what they’re potentially signing up for.

For more info about what to consider, take a look at some things you should know about becoming a Guarantor (PDF).

You can also find out more about what it means to be a guarantor on ASIC’s Money Smart website.

Frequently asked questions

We’re here to help

1

What happens if you don’t meet the repayments of a guarantor loan?

If you’re unable to make your repayments, your guarantor will be liable for the loan.

2

What home loans can you choose from?

Any of our loans can be used as a guarantor loan – your Home Lending Specialist or broker can help you find one that best suits your situation and needs.

3

Do you need a deposit if you have a guarantor?

No, you’ll be able to borrow up to 100% of the property’s purchase price. Keep in mind – the more deposit you have, the less equity your guarantor would need to offer to provide security on your loan. Also, you'll have higher repayments and pay more interest over the life of the loan.

4

How much can I borrow when using a guarantor?

There’s a range of things that affect how much you could borrow (like your income, expenses, credit score and more). This will also need to be considered with your guarantor’s situation. Your Home Lending Specialist or broker will be able to help you figure out your borrowing capacity.

Browse our range of home loans

...and find one to suit you.

Ask an expert 

Get in touch with a Home Lending Specialist, and they’ll respond within one business day. You can talk on the phone, meet at a branch, or have a Mobile Lending Manager come to you.