Risky types of home loans that you should think carefully about before applying

Non-traditional mortgages can work very well for the right borrower but they carry greater risks. We'll help you decide if they're right for you.

There are some alternative approaches to getting a mortgage that can help buyers in the right circumstances. But these loans carry significant risks. We're not saying you should completely avoid these products. But you need to do your research and make sure you're not getting yourself into an expensive mistake.

Guarantor home loans

If you haven't saved a deposit a guarantor can use their home as security to back your loan, letting you borrow potentially 100% of a property's value.

A guarantor is usually a parent or close family member and must have equity in their own property.

The risks

  • If you can't repay your mortgage for any reason your guarantor has to pay. This means they might need to sell their own house.
  • The stress and complications of having a guarantor can put strain on a close family relationship if things go wrong.

The benefits

  • You can buy a property without saving a large deposit and avoid paying lenders mortgage insurance.
  • Your guarantor only needs to guarantee a portion of the loan, meaning they're free of obligations once you've paid off the deposit amount.

You can learn more in our full guide to getting a mortgage with a guarantor.

Long-term mortgages

Most mortgages have a term of 30 or 25 years. But there are some 40 year mortgages out there. These may seem appealing at first because the monthly repayments are lower. But don't be fooled: a 40 year mortgage costs you much more in the long run.

The risks

  • If you take out a long-term mortgage simply to save money on a monthly basis on a 30 year mortgage, you will end up paying thousands of dollars more in interest.
  • If the rate of interest goes up, you will be left in a serious situation and may end up losing the house anyway.

The benefits

  • Your monthly repayments will be lower, costing you less in the short term. But even this benefit largely depends on the interest rate. A 30 year mortgage with a lower rate might offer similarly lower repayments and cost you less overall.

How 40 year mortgages cost you more

Mortgage$400,000$400,000$250,000$250,000
Loan term40304020
Interest rate5.7%5.7%5.7%5.7%
Interest paid$616,539.20$435,776.00$385,337.60$169,539.20
Difference$180,763.20$215,798.40

Shared equity mortgages

Shared equity home loans are available for low income borrowers in many Australian states. A shared equity loan allows you to purchase a property with assistance from an investor, who provides part of your deposit. In exchange, they get the loan back plus a share of the property's value, assuming it has increased.

The risks

  • The lender will receive a portion of your property's value.
  • If the value of the property falls your debt could increase significantly.

The benefits

  • You can buy a property more easily.
  • You might be able to combine a shared equity mortgage with another home loan.

If you've decided to get a traditional mortgage we have many options in the table at the bottom of this page. There's also a form where you can enter your contact details and get in touch with a qualified mortgage broker. Brokers specialise in helping borrowers in unique circumstances, so if you're considering any of the finance options above it's a good idea to speak to one.

Speak to a broker and get free, expert mortgage guidance

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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Rates last updated January 22nd, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.69%
3.72%
$445
$0 p.a.
90%
NSW and ACT customers only. Get a special discount for a limited time when you open an IMB Transaction Account.
3.54%
3.69%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate for home buyers with a 20% deposit. This product has a 100% offset account.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150000 get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.54%
3.58%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility. $900 cashback offer.
3.59%
3.63%
$0
$0 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.49%
3.64%
$0
$10 monthly ($120 p.a.)
70%
A very low variable interest rate for home buyers with a 30% deposit. This product has a 100% offset account.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
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 $2000000 from a convenient online lender.
3.79%
4.22%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.75%
3.75%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.
3.74%
4.49%
$445
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online.
3.85%
3.85%
$0
$0 p.a.
80%
Low fee loan with extra repayments. Pay no application and ongoing fees and take advantage of split and redraw options.
3.69%
3.85%
$0
$10 monthly ($120 p.a.)
70%
A low fixed rate mortgage for borrowers with a 30% deposit. Comes with a 100% offset account.
3.73%
3.87%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (for a limited time, subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.75%
4.49%
$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).
3.67%
3.72%
$600
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.80%
4.05%
$0
$0 p.a.
70%
Earn tens of thousands of Qantas Points to spend on flights, hotels and more with this variable owner occupier mortgage. Competitive variable rate mortgage that requires a 30% deposit.
3.49%
3.53%
$250
$0 p.a.
80%
A very low variable interest rate for borrowers with a 20% deposit. Add a 100% offset account for $10 a month.
3.82%
3.93%
$0
$10 monthly ($120 p.a.)
90%
Get Velocity Frequent Flyer Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
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.
3.72%
3.72%
$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.
3.79%
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.
3.69%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at $70% or below with this innovative online lender.
3.74%
4.13%
$0
$349 p.a.
90%
Get a sharp rate plus package discounts and a 100% offset account.
3.98%
5.01%
$0
$395 p.a.
90%
Fix the rate on your investment property for 2 years with this competitive home loan package.
3.84%
3.84%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.64%
3.59%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
3.89%
4.27%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan.
3.59%
3.58%
$0
$0 p.a.
80%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for a small fee.
3.89%
3.91%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
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.
3.69%
4.08%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.69%
4.75%
$0
$395 p.a.
90%
Enjoy a competitive rate with no application fee for this package loan.
4.04%
4.07%
$0
$0 p.a.
90%
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate. Cut down on interest costs with a 100% offset account.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
3.99%
4.44%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
3.69%
4.86%
$0
$395 p.a.
90%
Special discounted rate for first home buyers. Start your home buying journey with 2 years of fixed repayments at a competitive rate plus package discounts. Available with a 10% deposit.
3.70%
3.90%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.99%
3.95%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive fixed interest rate product with no ongoing bank fees.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.94%
3.94%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.99%
3.92%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.94%
4.95%
$595
$0 p.a.
95%
Borrow up to 95% LVR of the value of the property you're buying and pay no application or ongoing fees.
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.

Compare up to 4 providers

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Richard Whitten

Richard is a home loans expert at finder. He can help you navigate the complex world of home loans and find a better deal.

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HSBC Home Value Loan - (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.

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2 Responses

  1. Default Gravatar
    SarahJanuary 8, 2014

    Are there any financial institutions in Australia that offer home loans with a friend as guarantor?

    • finder Customer Care
      MarcJanuary 8, 2014Staff

      Hello Sarah,
      thanks for the question.

      There are some lenders who will allow a friend of the borrower to become a guarantor for a home loan. You may wish to carry out a search on the internet to find lenders who will offer this service. It’s important to also know how a guarantor arrangement works, so I’ve sent you some information regarding this.

      I hope this helps,
      Marc.

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