Get a 100% home loan with help from a guarantor

A guarantor can get you into the property market years sooner and help you save thousands on LMI.

If you're not able to save up a large deposit or want to avoid paying lenders mortgage insurance (LMI), a guarantor can help. To be eligible, you need a family member who owns a property and is willing to guarantee your deposit. This can be a risky option and isn't for every borrower, but in the right circumstances getting a guarantor can get you into the property market sooner.

Compare mortgage options below or read more about the details, benefits and risks of a guarantor mortgage.

Compare home loans with guarantor options in the table below

Rates last updated October 16th, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.98%
3.99%
$600
$0 p.a.
95%
Get a 1% discount for the first two years of your loan and pay no application or ongoing fees.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.67%
3.69%
$0
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.69%
4.75%
$0
$395 p.a.
90%
Enjoy a competitive rate with no application fee for this package loan.
3.68%
3.70%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers that comes with a no fee debit card with a $5,000 limit.
3.84%
3.85%
$500
$0 p.a.
95%
Family pledge option available. Get a special discount off Bank of Melbourne's basic variable rate.
3.83%
4.89%
$0
$395 p.a.
80%
A flexible 3 year fixed rate loan you can use to buy your own home.
3.88%
4.51%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account. $1,500 cashback available (conditions apply).
3.88%
3.89%
$500
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.79%
5.07%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term. $2,000 cashback offer for eligible refinancers.
3.87%
3.89%
$0
$0 p.a.
95%
A low deposit mortgage for aspiring home owners. Fees are low and you can make extra repayments.
3.89%
4.92%
$0
$395 p.a.
95%
A fixed rate loan with low ongoing fee and redraw facility.
3.99%
4.86%
$595
$0 p.a.
95%
A low 3-year fixed rate with the option to split your loan for free.
3.99%
5.02%
$0
$395 p.a.
95%
Borrow up to 95% LVR (subject to approval) and fix your interest repayments for the next 3 years.

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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.

How do guarantor home loans work?

A guarantor uses their property to provide security for someone else's mortgage. They guarantee part or all of your loan and you get to borrow (and repay) the money. If you can't repay the money your lender will recover the debt from your guarantor's property. This is why it's a risky option for the guarantor. Your debt becomes their problem if you default on the loan.

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 is no longer responsible for the loan, meaning they're off the hook if the borrower defaults on the remaining 80%.

Who can be my guarantor?

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

  • Finances. A guarantor needs equity in their property and a stable income to satisfy lenders.
  • Credit. Your guarantor should have a good personal credit rating.
  • 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. Few lenders are comfortable accepting retirees and older people as guarantors. There are exceptions to this, of course.

How much can I borrow with a guarantor?

With the right guarantor, many lenders will let you borrow up to 100% of the value of a property or even slightly above that, up to 110%.

If you already have some money saved for a small deposit a guarantor loan can still be very helpful. If you have a 5% deposit saved you may have to borrow 95% of a property's value. Given that many loans have a maximum LVR of 80% you'd be liable for lender's mortgage insurance (LMI), a major additional cost.

Having a guarantor provide security for the remaining 15% of your deposit lets you get the loan and avoid that extra cost.

What are the benefits of guarantor home loans?

There are several benefits to guarantor loans, depending on your circumstances and financial goals. With a guarantor home loan you can:

  • 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 months or years saving up for a full 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.
  • Get a better rate. There are loans for borrowers with small deposits but they often have higher interest rates as well as LMI. Using a guarantor can unlock better loans with more favourable rates.
  • Improve your chance of getting approved. If the lender isn’t convinced that the borrower will be able to repay the loan, whether it’s because they lose their job, fall ill or are injured, then they are likely to require the signature of a guarantor. This way they have a backup so they can recoup their money if the borrower is no longer able or willing to make the payments. Thus, generally people with little to no credit history, low income borrowers or young people are often required to have a guarantor.

What happens to my guarantor if I can't repay my loan?

If you cannot make a mortgage repayment your guarantor's property might ultimately become the bank's property. This can be costly if the secured property is an investment. If the property is the family home it could be ruinous.

Guarantor loans are deeply personal and potentially risky. Financial strain can lead to relationship breakdowns and deep distress.

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).

John and Rachel's financial woes

Sad couple sitting on a couch.John and Rachel purchase a $600,000 apartment with a 5% deposit ($30,000). Rachel's parents guarantee a further 15% ($90,000).

John and Rachel repay $150,000 of their loan over the next few years. Sadly, John loses his job and the couple struggle to make repayments. Thankfully Rachel's parents are no longer liable because the $90,000 they guaranteed has been repaid.

While Rachel's parents are off the hook they do have to make some adjustments: John and Rachel are forced to sell up and move back in with them!

I'm thinking of going guarantor for my child: what do I need to know?

Agreeing to act as guarantor is a serious step and you need to consider your position very carefully. Ask yourself the following questions:

  • 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. Could you afford to pay this amount? Ensure you can cover the monthly repayments without outside help before you commit.
  • 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. If this causes a problem then going guarantor would be very unwise.
  • How is your relationship with the borrower? Are you on good personal terms? 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 and financial advice to make sure you fully understand what this process entails and how it will affect your financial situation.

What information should be in guarantor loan contract?

You should get a copy of the loan contract from the bank or lender because it will provide you with important and accurate information such as:

  • The size of the loan
  • The rate of interest, fees and other costs
  • Whether or not it is a secured loan, meaning whether or not the borrower had to offer an asset up as security, like a home or another type of property
  • The timeframe in which the loan has to be paid off
  • How much the monthly repayments are.

Need expert help? A mortgage broker can negotiate a guarantor loan on your behalf

I can't get a guarantor – do I have other options?

Unfortunately getting a guarantor is really the best way to get a mortgage without much of a deposit. But that doesn't mean you can't find creative ways to scrape together a 5% deposit. Use this guide on no deposit loan options to get a clearer idea of what you can do.

Image: Shutterstock

Marc Terrano

Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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38 Responses

  1. 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.

    • finder 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’s.

      Cheers,
      May

  2. 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
    Thanks

    • finder Customer Care
      BelindaApril 26, 2016Staff

      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 on this page, 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 a high-interest savings account to show the lender that you have financial discipline.

      All the best,
      Belinda

  3. 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?

    • finder 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,
      Marc.

  4. 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?

    • finder Customer Care
      MarcNovember 2, 2015Staff

      Hi Abby,
      thanks for the question.

      The use of a guarantor doesn’t 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.

      You can read more about the first home owners grant here.

      I hope this helps,
      Marc.

  5. Default Gravatar
    ThereseSeptember 29, 2015

    Hi,

    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

    • finder 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,
      Marc.

  6. Default Gravatar
    deniseAugust 7, 2015

    if i want to borrow 100,000 as a secure personal loan, can my mother who is a pensioner and owns her home can we use her home as the security and what would be involved?

    • finder Customer Care
      MarcAugust 7, 2015Staff

      Hi Denise,
      thanks for the question.

      Some personal loan providers will allow this, so it’s a good idea to compare secured personal loans and then contact the lender directly for more information. What’s involved in using property as security is that the guarantor will be required to guarantee a certain portion or the full amount of the loan. They then become responsible for the payment of the loan in the event that the primary borrower isn’t able to service the loan any longer.

      I hope this helps,
      Marc.

  7. Default Gravatar
    nellJune 28, 2015

    can someone sell there home if they have used some of it to be a guarantor

    • Default Gravatar
      JodieJune 30, 2015

      Hi Nell,

      Thank you for contacting finder.com.au, a financial comparison website.

      If your home is still being held as equity for the guarantor loan then you will need to have this released by the borrower you went guarantor for before you can sell your home. The borrower can release your property from the guarantee loan by paying out the portion of the loan that your home is held as equity for.

      We have a page on guarantor loans that includes information for those thinking of being, or who are, guarantor to a loan.

      It might also be best to speak to the borrower you have gone guarantor for as well as a financial advisor to see how you can proceed if you wish to sell your property.

      Regards
      Jodie

  8. Default Gravatar
    StephenMay 20, 2015

    HI,
    We already have an investment loan for a house, which we used a guarantor to mitigate paying LMI. My question is, can we use the same guarantor to buy a house to live in, again to mitigate LMI.
    Thanks

    • finder Customer Care
      BelindaMay 25, 2015Staff

      Hi Stephen,

      Thanks for your enquiry.

      Depending on your lender, you may be able to use the same guarantor to help buy your property.

      It would be best that you contact a lender directly to discuss your options.

      Thanks,
      Belinda

  9. Default Gravatar
    MumMay 1, 2015

    We went guarantor for our daughter and her husband for their home loan and now they are separating. If they sell the house they will be left with a $10,000 debt. She wants to sell and he doesn’t but there is no guarantee he will help contribute to the mortgage payments. Can we as guarantors make them sell the house?

    • finder Customer Care
      BelindaMay 26, 2015Staff

      Hi Mum,

      Thanks for your enquiry.

      As a guarantor, you do not have rights to own or sell the property that was bought with the loan.

      However, it would be best to contact a mortgage broker and to seek financial advice to discuss your rights as a guarantor in this situation.

      Thanks,
      Belinda

  10. Default Gravatar
    debApril 17, 2015

    if I was guarantor for a home loan for my son of say $500000 can I be guarantor for a specified amount of time like 2years

    • finder Customer Care
      BelindaApril 17, 2015Staff

      Hi Deb,

      Thanks for your question.

      Depending on the lender, it may be possible to limit your guarantee for a limited amount of time.

      Generally, the guarantee will remain in place until you apply to have it removed. However, it is important to realise that if you were to cancel your guarantee soon after the loan settlement, the borrowers may be eligible to pay Lenders Mortgage Insurance (LMI).

      After a few years, however, it is likely that the principal repayments will have impacted the LVR and should you decide to cancel the guarantee, then LMI may not be payable.

      The policies of each lender will vary, so make sure you seek financial advice to find a home loan that suits both the borrower and the guarantor.

      I hope you find this useful.

      Thanks,

      Belinda

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