Family pledge loans

If a family member who owns a property can guarantee part of your loan, then you can buy a home faster with a family pledge loan.

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A family pledge home loan is a way for buyers with small deposits to get a mortgage with help from family members. If your parents own their own property they can support your home loan by guaranteeing part of your deposit. If you can't repay it, they have to. Your family member's property is pledged on your behalf.

A family pledge is another word for a mortgage guarantor. A family guarantee is a risky strategy if the borrower can't repay the loan. And it means mixing family and finances in a way that can get messy. But for many borrowers it is a worthwhile strategy to consider and can help you enter the property market faster.

Home loans with a family guarantee feature

$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan
2.29%
4.11% p.a.
$0
$0 p.a.
95%
$577.55
A fixed rate loan which allows extra repayments, and charges a low application fee.
Greater Bank Great Rate Home Loan
2.59%
2.60% p.a.
$0
$0 p.a.
80%
$600.83
Fund the construction of your new family home with a very competitive variable interest rate.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.19%
3.72% p.a.
$0
$395 p.a.
95%
$569.91
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
IMB Fixed Rate Home Loan
1.89%
2.87% p.a.
$449
$6 monthly ($72 p.a.)
95%
$547.35
NSW and ACT customers only. Lock in a low fixed rate for two years. Available with a 5% deposit.
Heritage Bank Fixed Rate Home Loan
2.19%
4.23% p.a.
$600
$8 monthly ($96 p.a.)
95%
$569.91
Get a fixed rate for two years and borrow up to 95%.
Westpac Flexi First Option Home Loan
2.29%
2.72% p.a.
$0
$8 monthly ($96 p.a.)
95%
$577.55
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.49%
3.83% p.a.
$0
$0 p.a.
95%
$593.01
Split you home loan for free with one of the lowest fixed home loan rates.
Heritage Bank Advantage Package Fixed
2.39%
3.15% p.a.
$0
$350 p.a.
95%
$585.25
Get a partial offset account and flexible repayments with this package loan.
Newcastle Permanent Building Society Premium Plus Package Home Loan
3.77%
4.15% p.a.
$0
$395 p.a.
95%
$697.42
$2,000 refinance cashback
No application fee and 100% offset account. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
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How does a family guarantee work?

A family pledge allows you to use the equity in your parents’ property or another family member’s property as security on a home loan. Guarantors are limited to immediate family members, including parents, grandparents and siblings.

While it was once standard practice to guarantee the entire loan and put your home on the line, today the security on the new home loan can be split and you can limit your guarantee. For example, the equity in your parents’ property may be used as security for 20% of the loan, while the property you are purchasing will be used as security for the other 80% of the loan. So if you’re helping your kids purchase a property for $500,000, your 20% guarantee is only $100,000.

  • How much do they have to guarantee? A common strategy is to guarantee enough equity so that the borrower avoids paying Lenders Mortgage Insurance (LMI). A parent will need to guarantee 20% of the purchase price of the new property if the borrower has no deposit.
  • What can be bought with a family guarantee? The family guarantee can be used to buy a home or invest in residential property so buyers will be able to use normal home loans and investment home loans.

About Home Loan Guarantors

What are the benefits?

family guarantee home loan

The family guarantee will allow you to:

  • Access finance. Most loans will have a minimum deposit that will have to be paid upfront in order to be accepted. This will usually be around 20%, or less if you pay LMI. With a family guarantee you may be able to borrow more money and provide less of a deposit which will allow you to buy a home sooner.

  • Avoid LMI. Borrowing more than 80% LVR usually requires you to take out lender’s mortgage insurance, but a family guarantee means this extra expense can be avoided.

  • Increase borrowing power. A family guarantee can boost your borrowing power. The family guarantee will often be used to cover a deposit that can't be paid so you will be able to borrow close to 100% of the loan in some cases if properly secured. Often, guarantor borrowers can borrow 100% of a property value plus costs.

  • Eligible for FHOG. Taking out a family pledge home loan means you are still eligible for financial assistance through the First Home Owners Grant. In addition, it also means you will be eligible to access most mortgage products from a lender.
  • Limit your guarantee. While the traditional approach is to guarantee the full loan, in many cases you have the option of guaranteeing just a portion of the loan, for example 20%. Once the standard LVR requirements of the loan product have been met due to loan repayments being made or a rise in the valuation of the home, the guarantee on the loan is released.

What are the drawbacks?

  • Putting the family home at risk. If you’re the guarantor you could be putting your family home at risk, so consider all your options before choosing this approach.
  • Not receiving expert advice. If you’re considering applying for a family guarantee home loan, it’s important that you seek out independent financial and legal advice first. You need to understand exactly what the guarantor will be liable for in the event that you default on the loan.
  • Not all banks offer family guarantees. Family pledge home loans aren’t offered by all lenders, so the best thing to do is approach a mortgage broker for advice tailored to your needs.

The Big Four family guarantee loans

There are several family guarantees you can choose from. Below we will look at the Big Four banks and their family guarantee loans.

ANZ Family Guarantee

The ANZ Bank Family Guarantee allows some family members to use the equity in their home as a security for a part of your total home loan. Family members include parents, parents-in-law, stepparents and grandparents and siblings will be considered. With this you’ll be able to buy a property sooner and avoid paying the premium for lenders mortgage insurance, according to the ANZ website.

More info about ANZ home loans

NAB Family Guarantee

The NAB Family Guarantee permits a family member like a parent to use the equity in their existing home as a security on the new home loan of the borrower. There are some features you might want to be aware of. First of all this guarantee may be used to secure a range of NAB branded home loans, so you can still choose the loan best suited for you. Second, this guarantee has to be secured by either a first registered residential mortgage or NAB Term Deposit.

More info about NAB home loans

Commonwealth Family Equity

The Commonwealth Bank Family Equity loan provides five financing options. These options range from family member acting as a guarantor and therefore giving some kind of security towards a loan, to giving assistance with mortgage repayments. The Family Equity is suitable for borrowers who are unable to service the loan.

More info about CBA home loans

Westpac Rocket Investment Loan

Westpac allow you to guarantee a loan with the help your family. They also have family guarantee options within some of the investment loans. The Westpac Rocket Investment Loan, for instance, offers a family guarantee feature.This feature allows Westpac customers to borrow 95% of the purchase price and associated costs where their parents guarantee the loan through the provision of another security property.

More info about Westpac home loans

Family pledge loans

If your credit is not perfect or you simply don't have a lot of credit history, you may be able to opt for a family pledge loan. These types of loans require that someone else 'guarantee' the loan. This can be a parent or parents, a brother or sister or anyone in your family who would be comfortable offering you some help.

This support can come by way of using their own income to help to supplement the borrower's or they can use their own property as a security for the loan.

Reasons some borrowers choose a family pledge loan

  • Starting a new job – If you've just graduated and recently acquired a job in your field you may not have the salary and subsequently the buying power necessary to purchase a home. This is where a family pledge loan might be able to help. These loans will help you to buy a house while waiting for your income to increase. When your income is higher then you can pay off your loan a little faster.

  • Reducing or eliminating mortgage insurance – If you are able to purchase a home, but the chosen loan would require mortgage insurance then a family pledge loan could help. If a family member can assist you then you will have more purchasing power and you will not need to pay LMI. This insurance only benefits the lender so if you can avoid it it will be much better for you and you'll save money.

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26 Responses

    Default Gravatar
    MariannaJuly 12, 2018

    Currently, my dad is guarantor 100% for the property I am in. I am looking to refinance however most banks are only offering 20% from guarantor and rest I have to find. As this is not possible is there any banks out there that would do 100%?

      Avatarfinder Customer Care
      JhezJuly 16, 2018Staff

      Hello Marianna,

      Thank you for your comment.

      For refinancing, the first that you’d do is to speak to your current lender if they can grant you a 100% loan. If not, you may consider other options. While it is very little to no 100% home loans offer, there are ways that you can apply for a refinanced mortgage with little equity such as through a guarantor loan.

      There are lenders that can offer you up to 100% LVR with a guarantor loan. Please check your eligibility with lenders on the list. Most importantly, please seek to advise from a mortgage broker so they can provide you with options based on your needs. I hope this helps.

      Regards,
      Jhezelyn

    Default Gravatar
    IvyNovember 30, 2016

    Hi I have been a guarantor for some years now when does it stop and we get clear and our deeds are return to us regards

      Avatarfinder Customer Care
      DeeNovember 30, 2016Staff

      Hi Ivy,

      Thanks for your question.

      Generally, a guarantee will be released once the standard LVR requirements of the loan product have been met due to loan repayments or an increase in the valuation of the home. You can get more details on this by directly contacting the bank or lender.

      Cheers,
      Anndy

    Default Gravatar
    TanyaAugust 23, 2016

    Hi,
    I am wanting to purchase a property of $180,000 with a guarantor I am just wondering what criteria is necessary such as do I need to have been in my jo for a certain time etc.

      Avatarfinder Customer Care
      MayAugust 24, 2016Staff

      Hi Tanya,

      Thank you for contacting Finder.

      Generally, if you apply for a home loan, the lender would look at and assess your income, job stability, assets, debts, and credit rating. Please check our guide about home loan guarantors if you’re looking for a home loan with a guarantor.

      I’d also recommend that you seek a piece of advice from a mortgage broker who will take all your circumstances into account and offer you a range of lending options.

      I hope this has helped.

      Regards,
      May

    Default Gravatar
    ANTHONYMarch 23, 2015

    My wife and I are 66 and would like to help our son buy a home, we have the money but if we use all our savings we will leave nothing for our on going future, can we help him without putting money out as he’ll inherit all our estate THANKS

      Avatarfinder Customer Care
      MarcMarch 24, 2015Staff

      Hi Anthony,

      Thanks for the question.

      Depending on your situation and the lender your son opts to go with, a guarantor option might be available. This will see some of your property go towards your son’s deposit. I recommend contacting one of the lenders on this page directly by selecting ‘Go to Site’ to head over to their website to apply.

      I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.

      I hope this helps,
      Marc

    Default Gravatar
    amandaFebruary 18, 2015

    will they do family guarntors loans if the person wanting the actual loan has bad credit

      Avatarfinder Customer Care
      ShirleyFebruary 19, 2015Staff

      Hi Amanda,

      Thanks for your question.

      These type of applications are handled on a case by case basis. There are few factors to consider, such as the lender’s policy, the severity of your bad credit and the financial position of your guarantor.

      If you would like to discuss your eligibility or options, please get in touch with a lender featured on this page.

      Cheers,
      Shirley

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