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Guarantor loans

Buying with a family guarantor.

A family guarantor structure can be the fastest way into the market without LMI — if it's designed properly and the exit is planned from day one.

How it works

Security-only vs unlimited guarantee.

A guarantor home loan uses equity in a family member's property (usually a parent's) as additional security. The borrower still needs to service the loan from their own income. The guarantor is not expected to make repayments unless the borrower defaults. The effect of the extra security is to push the effective LVR below 80%, which removes the need for Lenders Mortgage Insurance.

The most important structural question is whether the guarantee is 'limited' (security only, for a defined portion) or 'unlimited' (the guarantor is exposed to the full loan). A properly structured guarantor loan is always limited, with a clear release mechanism once the borrower's property has enough equity on its own. This page is part of home loans.

What we model

The four things we design upfront.

Guarantee size
The exact dollar amount of the guarantee, calculated as the gap between the borrower's deposit and the 80% LVR threshold.
Guarantor exposure
Which of the guarantor's assets is pledged, and whether the exposure is documented as limited.
Release trigger
The LVR or repayment milestone at which the guarantee is released — usually when the borrower's property reaches 80% LVR on its own.
Risk to the guarantor
A frank conversation about what default would actually mean for the guarantor's property and retirement plans.
Q&A

Guarantor FAQs

Does the guarantor need to earn an income?
No. The borrower still needs to service the loan from their own income. The guarantor provides security, not repayment capacity. That said, lenders will check the guarantor's asset position and often their age to confirm the arrangement is responsible.
When can the guarantor be released?
As soon as the borrower's loan balance (or the property's value growth) pushes the LVR below 80% on the borrower's property alone. That usually happens within 3–7 years on a standard loan, earlier with price growth. We build the release mechanism into the original structure so it's mechanical, not a fresh argument with the bank.
What if we default?
The lender can call on the guarantee. If the borrower's property sale doesn't cover the debt, the lender can pursue the guarantor's pledged security. This is why the structuring conversation always involves the guarantor, not just the borrower.
Keep exploring

Related pages

First home buyersLow deposit & LMI
General advice disclaimer. The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether it is appropriate for you before acting on it, and seek professional advice where relevant.

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