Guarantor Home Loan

Guarantor home loans can help you buy a home with little or no deposit. Learn how the home loan guarantor process works and eligibility criteria.

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Wondering if you're eligible for a guarantor home loan? If you have a family member who owns property, they may be able to act as your guarantor and help you get a mortgage and buy a home more easily. You won't need to save 10% to 20% of the property's purchase price, and you can avoid a hefty lenders mortgage insurance premium. Here's how guarantor home loans work and how to find out if you're eligible.

Compare home loans with guarantor options

The lenders in this table allow guarantors to cover at least a portion of your loan. Some of them may have specific restrictions or require a 5% deposit in genuine savings.

Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

Bank of Melbourne Advantage Package Fixed Home Loan P&IHome 2Y Fixed≥ 20% Deposit

Bank of Melbourne Advantage Package Fixed Home Loan
  • App: $0
  • Ongoing: $395 p.a.
$3,000 refinance cashback
Get a competitive home loan rate for two years. Requires at least a 20% deposit. Refinancers borrowing $250,000 or more can get a $3,000 cashback (Other terms, conditions and exclusions apply). Refinancers Only.

St.George Basic Home Loan P&IHome≥ 20% Deposit

St.George Basic Home Loan
  • App: $0
  • Ongoing: $0 p.a.
$3,000 refinance cashback
Get this low-rate variable loan with a 20% deposit and pay $0 application fee. Borrow from $150k (or $250k to be eligible for the cashback offer). Terms, conditions & exclusions apply. Refinancers Only. Green Home Loan P&IHome≥ 10% Deposit Green Home Loan
  • App: $0
  • Ongoing: $0 p.a.
Buying an energy-efficient home to live in? Get a discounted rate and borrow up to 90%.

Bank of Melbourne Basic Home Loan P&IHome≥ 20% Deposit

Bank of Melbourne Basic Home Loan
  • App: $0
  • Ongoing: $0 p.a.
$3,000 refinance cashback
A competitive variable rate loan. Refinancers borrowing $250,000 or more can get a $3,000 cashback (Other terms, conditions and exclusions apply). Refinancers Only. Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit Smart Booster Discount Variable Home Loan
  • App: $0
  • Ongoing: $0 p.a.
Home buyers can get a very low discounted variable rate for the first year. Requires a 20% deposit. Add an offset account for an additional 0.10% on your interest rate. Get your loan processed fast and settle within 30 days.

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How does a guarantor home loan work?

If you have a close family member with equity in their property (that means, they own all or most of the property) they can guarantee your deposit. You still need to borrow money from a lender and repay it, but the guarantor provides security.

And that's the catch: if you are unable to repay the mortgage your guarantor may have to.

To minimise risks a guarantor can guarantee only a portion of a loan, say, 20%. Once the borrower has repaid 20% of the loan the guarantor's property is safe even if the borrower fails to repay the remaining 80%.

Let's examine the process with a typical guarantor scenario:

Guarantor mortgage scenario

Sad couple sitting on a couch.

  • John and Rachel purchase a $600,000 apartment with a 5% deposit ($30,000).
  • They estimate their lenders mortgage insurance (LMI) premium using Genworth's calculator and are shocked to learn they'll need to pay $25,000.
  • Rachel's parents own their home outright. They agree to guarantee a further 15% ($90,000) of the property cost. This eliminates the LMI cost completely.
  • John and Rachel repay $150,000 of their loan over the next few years. Rachel's parents are no longer liable because the $90,000 they guaranteed has been repaid.

How much can I borrow with a guarantor?

With a guarantor, many lenders will let you borrow up to 100% of the value of a property or even up to 110%, enough to cover other costs like stamp duty and moving costs.

If you have a 5% deposit saved, a guarantor can be beneficial. Having your parents guarantee a further 15% of the deposit means you can avoid paying LMI.

How can I find out if I'm eligible for a guarantor home loan?

First, speak to your parents or whoever you're asking to guarantor your loan to confirm they're willing to assist. You need to find out how much their property is worth, and how much their loan is. This allows you to work out how much equity they have available. For instance:

  • If their home is worth $700,000 and their loan is $450,000, they have $250,000 equity.
  • If their loan is $600,000, then they only have $100,000 equity.
  • The more equity they have, the greater the chance that the bank will accept them as a guarantor on your loan.

Once you've worked out that your guarantor has sufficient funds to help you, approach your bank and lender and see what their specific loan criteria is. Note that some lenders may require borrowers to have at least 5% of a deposit in genuine savings, even with a guarantor.

Who can act as a guarantor?

Some lenders only accept parents as guarantors while others accept close relatives. Every lender has different requirements, but the following criteria usually apply:

  • Finances and credit. A guarantor needs equity in their property, a stable income and a good credit rating to satisfy lenders.
  • Residency. Lenders generally want a guarantor to be an Australian citizen or permanent resident.
  • Age. A guarantor must be over 18 and typically under 65.

Risks and benefits of a guarantor mortgage

For the right borrower having a guarantor is a huge help. But if you cannot make a mortgage repayment your guarantor's property might ultimately become the bank's property.


  • Get into the property market faster. Once you're in the market and paying off your loan you can build up equity and enjoy capital gains if the property grows in value. If you spend more time saving up a 20% deposit without a guarantor the property might grow in value and you'd need to save even more.
  • Avoid LMI. Lenders mortgage insurance can add thousands of dollars to your home loan. A guarantor loan takes this cost out of the equation.
  • Improve your chance of getting approved. Having a guarantor will strengthen your home loan application.


  • Your property at risk. The guarantor risks their property if the borrower can't repay their loan. It's a serious risk and both borrower and guarantor need to understand it fully before entering a guarantor arrangement.
  • Relationship strain. Mixing family and financial relationships can cause serious emotional strain. You should evaluate not only your finances but your relationship beforehand.
Thankfully, a guarantor is only liable to repay the amount they guarantee. Once that amount is repaid the guarantor is released from further liability (the borrower, obviously, is not).

Planning to act as guarantor for your child? Ask these questions first

  • Can I afford to go guarantor? Assess your financial situation realistically. Plan out a scenario where you suddenly become liable for the full amount you've guaranteed.
  • Can the borrower afford this loan? Try to assess the borrower's financial situation as clearly as possible. Don't make this judgement on instinct either: ask for hard evidence.
  • How is your relationship with the borrower? Just because you're close family doesn't mean you get along at the best of times. And with large sums of money involved even good relationships can become strained.
  • Have I sought professional advice? Get independent legal advice to make sure you fully understand the guarantor process.

What are my options if I can't get a guarantor for my home loan?

Having a parent who is able to guarantee your deposit is a privilege that many borrowers don't have. Your parents may be able to help in other ways or you may have to go it alone. Here are some options:

A mortgage broker can help you navigate your options as a borrower, whether you need a guarantor or not.

Find a mortgage broker

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38 Responses

    Default Gravatar
    KeithApril 8, 2018

    We are selling an investment property which we have used as a guarantee for sons apartment which he is renting out while he works in Sydney.
    His present bank require him to refinance and seem unwilling to use our home as equity. He has negative equity in the apartment due to recent alterations.
    We want to transfer the guarantee onto our home which is paid for.
    We have no outstanding debts. His

    Are there any financial institutions that would accommodate this transfer.

      Avatarfinder Customer Care
      MayApril 9, 2018Staff

      Hi Keith,

      Thanks for reaching out.

      Best if you can speak to a mortgage broker who can take into account your circumstances as well as your son’s. They know a wide range of lenders in the market who can give more options for your son.


    Default Gravatar
    RachaelApril 22, 2016

    We want to buy a house and looking into no deposit Lon with a guarantor but only my partner works $45k a year and I am on centrelink and we have two children. Would it be possible that any bank would lend to us we are looking at a house $160k

      Default Gravatar
      BelindaApril 26, 2016

      Hi Rachael,

      Thanks for getting in touch.

      Your ability to qualify for a home loan will depend on several factors; your combined income, assets, liabilities, credit history, and the lender’s eligibility criteria for a particular product.

      Unfortunately, it can be difficult to qualify for a home loan if you’re receiving Centrelink benefits and if only one applicant is working as the lender may view you as a high-risk borrower. However, there are mortgage brokers who can help you find lenders, such as specialist or non-bank lenders, that are more likely to review your application.

      You can read more about no deposit home loans and you can also compare 95% loan-to-value (LVR) home loans. We also have an article about home loans for Centrelink recipients which may help you.

      When you apply for a no deposit or guarantor home loan, the application process can be more lengthy compared to a traditional home loan as the lender will need to assess the security and financial position of your guarantor. However, you can take measures to improve your chance of being approved. This may involve reducing your existing debts (e.g. credit cards) and making regular deposits into high-interest savings account to show the lender that you have financial discipline.

      All the best,

    Default Gravatar
    JadeNovember 23, 2015

    Can I get a guarantor loan if the guarantor lives overseas and their equity is in the property they own overseas?

      Avatarfinder Customer Care
      MarcNovember 24, 2015Staff

      Hi Jade,
      thanks for the question.

      Lenders generally require the guarantor to be Australian citizens, although some lenders will allow them to be working or living overseas. If the loan is being secured with the equity of a property (and not cash), the property is usually required to be in Australia.

      I hope this helps,

    Default Gravatar
    AbbyOctober 31, 2015

    My partner and I are planning on buying our first home. If we have a guarantor, are we still eligible for the first home owners grant?

      Avatarfinder Customer Care
      MarcNovember 2, 2015Staff

      Hi Abby,

      Thanks for the question.

      The use of a guarantor does not usually exclude buyers from the First Home Owners Grant. Keep in mind that depending on the state there may be limits on the value of the property and whether the grant can be used for established or new properties.

      The eligibility criteria for first home buyers differs between the states and territories. You can read more about the first home owners grant to find out your options.

      Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

      I hope this helps,

    Default Gravatar
    ThereseSeptember 29, 2015


    My partner & I would like to consolidate debt into a new mortgage, our equity just falls short to do this, are we able to use a partial guarantor for the shortfall? Our loan is 400k the property worth $475k debts of $57k

      Avatarfinder Customer Care
      MarcSeptember 30, 2015Staff

      Hi Therese,
      thanks for the question.

      This will depend on the lender, but generally speaking a guarantor can guarantee any portion they’re comfortable with.

      I hope this helps,

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