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Guarantor home loan rates & requirements

  • A guarantor home loan can help you buy a home with little to no deposit.
  • Our analysis shows the potential savings with a guarantor vs no guarantor.

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guarantor home loans

Compare guarantor home loans

Compare the best guarantor home loans in Australia. Check your eligibility with 26 lenders online, instantly. We display all guarantor home loan options on our database and we’re not paid by lenders if you click through to their website. The table is sorted by lowest regular repayment. Use the filters to search for your best guarantor home loan. Read the comparison rate warning and other important information.

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Rates updated 10 October 2024

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What is a guarantor home loan?

A guarantor home loan is one that’s partially secured by a parent or other family member who offers up their own home equity in addition to your cash deposit. For the guarantor, their equity is the value of their home minus how much they owe on it. Some lenders call it a family security guarantee or family pledge home loan.

Using a guarantor can help cover a portion of your loan amount, typically enough to lower your loan-to-value ratio (LVR) to 80%, and avoid lender’s mortgage insurance (LMI). This means you don't need to save a 20% home deposit. Sometimes, a guarantor can guarantee your entire mortgage, allowing you to get a home loan with no deposit.

Without a guarantor, most lenders require at least a 5% deposit, which is an LVR of at least 95%. In that case, you’d have to pay LMI unless you apply via the government’s Home Guarantee Scheme for low-deposit borrowers, which has limited availability.

There’s more scrutiny with guarantor loans

Mansour Soltani home loan expert

Mansour Soltani , Home Loans Expert

“First, your guarantor must show they can service the portion of the loan they’re guaranteeing. Lenders will perform a detailed financial assessment of both the guarantor and borrower. You’ll both need to show three months of clean bank statements showing no late fees or overdraws. I've seen guarantor home loan applications rejected for something as small as a $10 late fee."

Mansour Soltani , Home Loans Expert

Guarantor home loan

How does a guarantor home loan work?

Your guarantor must be a homeowner with enough usable equity (equity they can borrow against) to secure part or all of your home loan. Your guarantor doesn't need to provide any cash payment, and no actual money is exchanged as part of the guarantee. Instead, the guarantee relies on the value of their property to support your loan.

You’ll still need to borrow money from a lender, and the application process for a guarantor loan will take longer than a standard home loan. This is because both you and your guarantor will need to submit a complete set of documents (e.g. proof of income, bank statements) and undergo serviceability and credit checks.

One important detail to note is that your home loan will be secured by two properties (yours and the guarantor’s) instead of one. This means your guarantor loan application will require two property valuations.

Other aspects of the loan will be no different to a standard mortgage. You should still compare home loan rates and fees to ensure you're getting a good deal.

A guarantor home loan can be structured in two ways
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Single home loan

With your guarantor providing security. The guarantor is listed as a third party to the loan.

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Two separate home loans

One that covers the majority of the property's value and is secured solely by the home you're buying, and a second mortgage that covers the remaining value (usually 20%), secured by your guarantor. Once you’ve paid off the second smaller loan, you can apply to remove the guarantee.

What happens if there's a default?

In the event of a default, your property could be sold as a first resort to recover the lender’s costs. If the property sale doesn’t cover the outstanding mortgage balance, the lender may seek the remaining amount from the guarantor.

Your guarantor can be released from their obligations once you’ve made enough repayments or accumulated enough equity in your property to cover the guaranteed portion of your home loan.

It’s important that both the borrower and guarantor understand the responsibilities and conditions of a guarantee agreement. Lenders usually require both parties to sign a declaration confirming they have obtained independent legal advice before finalising the home loan agreement.

Guarantor mortgage example

Here’s a simple scenario showing how a home loan with a guarantor works:

  • Let’s say you want to buy a property worth $600,000.
  • You’ve saved $30,000, which is 5% of the purchase price, but you need another 15% ($90,000) to avoid LMI.
  • Your parents own a home valued at $800,000 and have enough equity to guarantee the remaining $90,000.
  • You can now borrow the money you need without putting any more money down or paying LMI.
  • Over the next few years, you repay $90,000 of your loan principal and release your parents from the guarantorship.

How much can you borrow with a guarantor?

If you have a guarantor, you may be able to borrow the full loan amount (100% of the purchase price) without having to pay LMI. Some lenders will let you include additional costs, like conveyancing fees, into the loan, so you’d effectively borrow more than 100%.

However, most lenders will limit the guarantee to 20% of the property’s value to reduce the LVR to 80%.

How much you can borrow in dollar terms with a guarantor will depend on your income, expenses, liabilities, and your lender’s guarantor policy.

Your savings history will also be taken into account. Most lenders will still require you to show a certain amount of genuine savings, such as a 5% deposit, even if you have a guarantor. They will also check that you can service the full amount, irrespective of your guarantor’s contribution.

Showing savings is important even with a guarantor loan

Mansour Soltani home loan expert

Mansour Soltani , Home Loans Expert

“I had a client applying for a guarantor loan with a 50% LVR. Even though they passed the serviceability assessment, their loan was declined because they weren’t showing any savings. They were spending their entire salary by the end of the month. From a lender’s perspective, this type of spending behaviour suggests the borrower couldn't manage a mortgage effectively, regardless of having a guarantor.”

Mansour Soltani , Home Loans Expert

Guarantor home loan savings analysis

Home buyer without a guarantorHome buyer with a guarantor

Property price

$600,000

$600,000

Deposit

5% ($30,000)

5% ($30,000)

Loan amount

$570,000

$570,000

Guarantor equity contribution

No guarantee

15% ($90,000)

LMI cost*

$26,305 (added to loan)

$0

Monthly repayments

$3,575.15

$3,417.44 (save $158)

Total interest payable

$690,749

$660,278 (save $30,471)

Total to repay

$1,287,054

$1,230,278 (save $56,776)

Both examples assume a 6% interest rate and a 30-year loan term. *LMI estimate based on Westpac’s calculator for an existing property in Queensland. Each lender may calculate LMI differently.

Pros & cons of guarantor home loans

Pros
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  • You can buy a home sooner with a smaller deposit or no deposit if you have a guarantor
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  • Avoid paying LMI if the guarantor guarantees up to 20% of your loan amount
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  • Having a guarantor may increase your chances of approval as it provides additional security for the loan
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  • With a guarantor, you might be able to borrow more than you could on your own (increasing your borrowing capacity)
Cons
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  • The guarantor is financially liable if you’re unable to make repayments
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  • Some of the guarantor’s equity is tied up in your property, limiting their options to sell or refinance
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  • A guarantor can access information about your loan and financial situation, which may result in reduced privacy
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  • Mixing family and finances could strain relationships

Guarantor loan requirements Australia: Who can be a guarantor?

Most lenders accept parents or immediate family as guarantors, including partners, siblings, some grandparents and children (aged over 18). Lenders have different eligibility criteria, but the following generally apply:

  • A guarantor must be over 18 and typically under 65
  • They must be Australian citizen or permanent resident
  • They must own a home with sufficient usable equity to provide as guarantee
  • They must have a good credit score and supply supporting financial documents
  • They must meet the lender’s minimum income requirements

According to major bank ANZ, lenders tend to prefer guarantors who can use equity in a property they own as the guarantee. The other option is a serviceability guarantor who pledges some of their income. This is considered riskier from a lender’s perspective and is rarely accepted.

How to apply for a guarantor home loan

Applying for a guarantor home loan involves additional paperwork and steps compared to a standard home loan application.

1

Check your eligibility

Lenders generally have similar eligibility requirements for guarantor loans, including proof of income (showing you can service the full loan amount), a good credit score, and a guarantor with enough usable equity to secure part or all of your loan.

2

Submit your guarantor loan application

You can apply for a guarantor loan directly with your lender or via a broker who will handle the entire process on your behalf. You’ll be asked to provide some basic information, such as your budget for a property, deposit (if any), employment history, and any existing debts you may have.

3

Provide your documents

You and your guarantor will need to provide a full set of income documentation (e.g. payslips, tax returns), proof of identification, bank statements detailing living expenses and liabilities, and a record of your assets.

Additionally, your guarantor will need to provide a signed guarantor agreement, a copy of their mortgage documents and possibly proof of independent legal advice (depending on the lender's requirements).

4

Get pre-approval

The lender will assess your borrowing capacity based on both your financial situation and that of your guarantor (e.g how much usable equity they have). After the assessment, you may receive home loan pre-approval, which gives you more credibility as a serious buyer.

5

The lender will conduct a credit check

Your lender will review both your credit file and that of your guarantor through an external bureau, like Equifax or Experian. They will typically check your repayment history, credit limits, and any issues on your credit report. Your lender should get your permission before conducting a formal ‘hard’ credit check.

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There will be two property valuations

Since a guarantor mortgage is secured by both your property and the guarantor’s, the lender will need to carry out two property valuations. They will assess the value of both properties to determine how much your guarantor can cover for your loan and your LVR.

7

Get unconditional approval & a loan offer

If the property valuations meet the lender’s criteria, you may receive unconditional approval for the guarantor loan. The lender will then issue a formal loan offer outlining the terms and conditions, including your interest rate. Review the offer thoroughly with your conveyancer and sign it if you agree to the terms. Your guarantor will also receive a copy of some (not all) of the loan documents.

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Check back in 1-2 years

Mansour suggests ordering another valuation after 1-2 years to see how much equity you’ve built up in your property and if it’s enough to release the guarantor from your home loan (you’ll need at least 20% equity). At the same time, you could refinance your home loan to a more competitive interest rate.

Home loans guides & resources

What's the next step on your property journey? Our home loan guides will help you navigate the road ahead, whether you're buying, building or looking to save on an existing loan.

FAQs about guarantor home loans

You can usually apply to release the guarantor from your home loan once you have enough equity in your property to cover their guaranteed portion. This typically means waiting until your loan balance is less than 80% of your property’s value (below 80% LVR).

The other common requirement is that you have always made your loan repayments in full and one time.

The lender will generally need to conduct a property valuation to see if there’s enough equity in your home to release the guarantorship. If for some reason the guarantor wants to withdraw from the agreement before there’s enough equity in your property, they’ll need to pay out their guaranteed portion of the loan. You may have to pay additional fees to release your guarantor, depending on your lender.

Most lenders charge fees to process the extra paperwork for a home loan with a guarantor, whether structured as one loan or two separate loans. Additionally, you may incur a valuation fee for the guarantor’s property.

Home equity is usually calculated by subtracting your home loan balance from the current market value or the bank's valuation of your property.

For example, if your balance is $600,000 and your property is worth $800,000, you have up to $200,000 of equity. That’s your total home equity.

However, lenders typically won't let you use all the equity in your home (it would be too risky). They generally allow up to 80%. This is known as your usable equity, which is the amount you can access to guarantee a home loan or refinance.

Not every borrower can apply for a home loan with the help of a guarantor. If that’s the case, there are some other options worth considering, such as:

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  • Low deposit home loan: A low deposit home loan allows you to buy a home with a 5-10% deposit instead of the standard 20% of the property’s value most lenders require. You may need to pay for LMI in this scenario.
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  • No deposit home loan: Some high-income earners or professionals in secure or high-paying industries may qualify for a no deposit home loan without a guarantor.
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  • Home Guarantee Scheme (HGS): This Australian government scheme helps eligible home buyers to buy a home with a deposit of as little as 5% (or 2% for single parents) without paying LMI. It’s available through participating banks.
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  • Help to Buy scheme: Expected to commence sometime in late 2024, the Help to Buy scheme is a new national shared equity scheme that will allow low-to-middle-income earners to buy a property with a deposit of as little as 2%, with the government contributing 30-40% equity towards the purchase. Income thresholds apply. The Help to Buy legislation is currently before the Senate.
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  • Deposit bond: A deposit bond is an alternative to a cash deposit. It’s an insurance policy that guarantees the borrower will pay a deposit at settlement or by the agreed period stated in the policy document.
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  • Co-buying: You could buy a property with family or friends and share ownership. All parties will be liable to repay the loan. A ‘tenancy in common’ agreement is where each party owns an individual share in the property. A ‘joint tenancy’ agreement is when both tenants own the property together, but no one owns an individual share.

Megan is a finance writer with more than 10 years of experience in the industry. She’s passionate about helping people make sense of financial topics and principles. She's certified in Finance & Mortgage Broking and is compliant to provide general advice in Tier 1 General Insurance.

Mansour Soltani is Money.com.au’s home loans expert. He’s a mortgage broker with more than 20 years of experience in the finance and real estate industry. Mansour is the Director of Soren Financial and has been featured in publications such as the ABC, Domain.com.au and Australian Broker.

Important information

Home loan comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. The comparison rates only apply to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you.

General information only

The information on this page is general in nature and has been prepared without considering your objectives, financial situation or needs. You should consider whether the information provided and the nature of any home loan product is suitable for you and seek independent financial advice if necessary.

We are not providing you with a recommendation or suggestion about a particular home loan. You should read the relevant disclosure statements or other offer documents before deciding whether to apply for or continue to use a particular product.

What products, features and information are shown

While we make every effort to ensure all home loans available in Australia are shown in our comparison tables, we do not guarantee that all products are included.

Our product comparisons may not compare all home loan features and attributes relevant to you.

Product information, such as interest rates, fees and charges, is subject to change without notice. Before acting on any information, you should confirm the relevant product information with the lender.

How home loans are sorted and filtered by default

Users can easily change the sort order and apply product filters to our product comparison tables. However, when you arrive on a page initially, by default home loans are sorted by:

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  • Lowest regular repayment amount, then;
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  • Loans interest rate, then;
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  • Lowest comparison rate, then;
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  • Provider name (A-Z)

Some home loan products listed in our tables are available through a mortgage broker. These are the products with an option to ‘Check Eligibility on Money.com.au’. Mortgage brokers may not be able to offer loans from every provider and there may be more suitable loans for your personal circumstances.

Mortgage brokers are not authorised by Money's Australian Credit Licence and operate under their own Australian Credit Licence, or as a credit representative of another Australian Credit Licensee. Mortgage brokers can make recommendations about home loan products that may suit your objectives, financial situation and needs.

Our tables feature all home loans available from lenders on our database that match the search criteria selected. Lenders do not pay to feature in our tables, nor do we earn commission if you click to visit a lender’s website. The order of the products in the table is not influenced by any commercial arrangements.

If you get help from a mortgage broker as a result of visiting this page, we may earn a commission.

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