How a guarantor loan generally works

Instead of relying purely on your own deposit, a family member — most commonly a parent — offers a portion of the equity in their own property as additional security for your loan. This can let you borrow a higher percentage of the purchase price than you'd otherwise qualify for, and in many cases avoid Lenders Mortgage Insurance, which would normally apply above 80% LVR. It doesn't remove the need for you to service the loan yourself — it's a structure that helps you get started sooner, not a way around genuine borrowing capacity.

What's actually at risk for the guarantor

This is the part that deserves the most honest conversation. Structured properly, a guarantee is usually limited to a specific portion of the guarantor's property — enough to cover the deposit shortfall, not the whole loan or the whole property. But if repayments were ever missed and the loan needed to be enforced, the guarantor could genuinely be called on to cover that guaranteed portion. It's a real commitment, and we make sure both you and your guarantor understand exactly what's being agreed to before anyone signs.

How and when the guarantee comes off

A guarantee isn't meant to be permanent. As you pay down the loan and the property (hopefully) grows in value, your loan-to-value ratio improves — and once it reaches a level most lenders are comfortable with, the guarantee can typically be released, freeing up your guarantor's property entirely. Timelines vary by lender and by how the property performs, so it's worth checking in on periodically rather than assuming.

General information only. This page is general in nature and doesn't take into account your personal financial situation, objectives or needs. It isn't tax, legal or financial advice. Lending criteria, product availability and policies vary between lenders and are subject to change — always confirm current detail with your broker before making decisions. We'd strongly recommend any guarantor also seek independent legal advice before agreeing to a guarantee.

Read the in-depth guide: how family guarantees work →

Frequently asked

Who can be a guarantor?

Typically a close family member — most commonly a parent — with sufficient equity in their own property and the capacity to meet the guarantee if it were ever called on. Lender policies on who qualifies vary.

How much of my parents' property is actually at risk?

Usually only a limited portion, structured to cover the deposit shortfall — not the whole property or the full loan. The exact structure depends on the lender and should be explained clearly before anyone signs anything.

When can the guarantee be released?

Generally once you've built enough equity in the property — through repayments, value growth, or both — to no longer need the guarantee, often reviewed once you reach a certain loan-to-value ratio. This varies by lender.

Does a guarantor loan mean I avoid Lenders Mortgage Insurance?

Often yes — this is one of the main reasons people use a family guarantee, since it can let you borrow above 80% LVR without LMI applying. Whether that's the case depends on the specific lender and structure.

What happens if I can't make repayments?

The guarantor could be called on to cover the guaranteed portion, which is exactly why this is a real commitment for them, not a formality. It's worth both parties understanding this clearly before proceeding.

Can a guarantor be released early if my situation changes?

Sometimes, if you've built sufficient equity sooner than expected — worth checking in on periodically rather than assuming the original timeline is fixed.