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Guarantor Home Loans
Buy Without LMI Using a Family Guarantor
A guarantor — usually a parent — can use the equity in their property to help you borrow without LMI and without a full 20% deposit. We structure the arrangement carefully to protect both you and your guarantor.
Overview
How a Guarantor Loan Works
A family pledge or guarantor loan uses a guarantor’s property (usually a parent’s home, fully owned or with substantial equity) as additional security for the portion of your loan that sits above 80% of the property value you’re buying. The guarantor doesn’t lend you money — they pledge part of their equity to the lender as security.
Because the additional security covers the high-LVR portion of your loan, the lender doesn’t require lender’s mortgage insurance. You can borrow up to 100% of the purchase price plus stamp duty and legal costs — without paying LMI and without having saved a 20% deposit yourself.
The guarantee is almost always capped to a specific dollar amount — typically just the portion of the loan above 80% LVR, not the full loan. That means if the worst happens and you default, the guarantor’s exposure is limited to the capped amount, not the full debt.
Once your loan balance drops below 80% of your property’s value — through repayments, capital growth or both — the guarantee can be released and the guarantor’s property is no longer at risk. This typically happens 3 to 7 years after settlement.
Key Features & Benefits
What a Guarantor Loan Offers
No LMI Premium
Avoid the LMI premium entirely, even with a small deposit. On a $600k purchase at 95% LVR, that’s roughly $18,000 saved at settlement.
Capped Guarantee Amount
The guarantor’s exposure is limited to a specific amount — typically the portion of your loan above 80% LVR — not the full debt. We structure this carefully.
Up to 100% of Purchase Plus Costs
You can borrow the full purchase price plus stamp duty and legal costs. The guarantee covers the additional borrowing, you put in whatever deposit you have.
Guarantee Release Pathway
Once your loan drops below 80% LVR (through repayments and/or capital growth), the guarantee is released. Typically 3–7 years after settlement.
Parent Doesn’t Lend Cash
The guarantor uses their property’s equity as security — they don’t write you a cheque. They keep their own home loan (if they have one) and their day-to-day finances unchanged.
Independent Legal Advice
Lenders require the guarantor to receive independent legal advice before signing — typically from a solicitor of their choice. This is non-negotiable and protects everyone.
Is This Right for You?
Is a Guarantor Loan Right for Your Family?
The Process
Guarantor Loan Process
Family Conversation
Before anything else — the guarantor needs to be willing, informed and comfortable. We can sit with both parties to explain how the arrangement works, what it costs and what the risks are.
Equity & Eligibility Check
We confirm the guarantor’s property has sufficient equity (usually requiring at least 20% equity above any existing loan) and that the guarantor’s age, income and credit support the role.
Capped Guarantee Structuring
We work out the smallest guarantee amount that gets you over the line at 80% LVR with your contribution — minimising the guarantor’s exposure.
Independent Legal Advice
The guarantor sees an independent solicitor to receive advice on the guarantee documents. This is a lender requirement and a sensible protection.
Settlement & Ongoing
The loan settles. We help you track your loan balance against your property value over the years, and lodge the guarantee release with the lender once you’re below 80% LVR.
FAQ
Guarantor Loan Questions
What happens if I can’t repay the loan?
If you default, the lender first calls in your loan and sells your property. The guarantor’s property is only at risk for any shortfall on the loan above the capped guarantee amount. In most cases, with property values stable or rising, the sale of your property covers the loan and the guarantor’s property is untouched. The worst-case exposure is limited and known upfront — that’s the point of the cap.
Does my parent need to give me money?
No — they pledge a portion of their property’s equity as additional security for the lender. They don’t transfer cash, don’t take on new debt themselves and don’t make repayments on your loan. Their own home loan (if they have one) is unchanged.
Can my parent’s home loan still continue?
Yes. The guarantor’s property can have its own existing loan; the lender simply takes a second mortgage on it for the guarantee amount. We confirm with the guarantor’s existing lender that this is acceptable to them (it almost always is).
What if my parents are retired?
Retired guarantors are common — they often have the most equity and the simplest financial position. Lender appetite varies: some lenders cap the maximum age of a guarantor at retirement age, others have no upper age limit. We narrow to lenders comfortable with the guarantor’s age and circumstances.
Can I have more than one guarantor?
Yes — some lenders accept joint guarantees, typically from two parents who own a property jointly. The combined equity is used to support the guarantee. This can be useful where neither parent on their own has enough equity to support the full amount required.
Talk About a Guarantor Arrangement
Free consultation. Bring your potential guarantor if you can. We’ll explain how it works, what’s required and what the realistic exposure is — for both of you.
Get a Free Consultation