Can You Get a Home Loan with a Guarantor in Australia?

Getting a Home Loan with a Guarantor in Australia

A guarantor home loan can help some buyers purchase a property sooner, especially when they have strong income but a small deposit.

Instead of giving you cash, a family member may use equity in their own property to help secure part of your loan. This can reduce the lender’s risk and may help you avoid lenders mortgage insurance.

But guarantor loans are not available with every lender. Some lenders may only accept parents as guarantors. Others may allow certain close family members. Some may limit the guarantee amount, require independent legal advice, or restrict the loan purpose.

This guide explains how Australian lenders may assess guarantor home loans and family pledge arrangements, based on current policy research.

What is a guarantor home loan?

A guarantor home loan is a loan where another person helps support your borrowing by offering additional security.

In most cases, the guarantor uses equity in their own property.

The guarantor usually does not make the loan repayments. The borrower is still responsible for paying the home loan.

The guarantor’s property is used as extra security, often for part of the loan.

This may help the borrower:

• buy with a smaller deposit
• reduce or avoid lenders mortgage insurance
• enter the property market sooner
• keep savings available for purchase costs
• borrow at a higher LVR than they could otherwise
• use family property equity instead of receiving a cash gift

The guarantor takes on real risk, so the structure needs to be understood properly before anyone signs.

How does a guarantor home loan work?

A guarantor loan usually involves two properties.

The first property is the home being purchased by the borrower.

The second property is owned by the guarantor and used to support part of the loan.

For example, a first-home buyer may buy a $700,000 property with limited deposit.

The lender may secure the main loan against the purchased property and secure a smaller guaranteed portion against the guarantor’s property.

The guarantee may cover:

• part of the deposit shortfall
• lenders mortgage insurance risk
• a limited portion of the loan
• purchase costs, where policy allows
• the amount above a standard LVR threshold

Many guarantor loans use a limited guarantee rather than making the guarantor responsible for the entire loan.

Who can be a guarantor?

Most guarantor home loans involve close family members.

Depending on the lender, acceptable guarantors may include:

• parents
• step-parents
• parents-in-law
• grandparents
• siblings
• adult children
• spouses or de facto partners, in limited cases
• legal guardians, in some cases

Some lenders are stricter and may only accept parents. Others may consider a wider range of immediate family members.

A friend, cousin, aunty, uncle or distant relative may be harder to accept unless the lender’s policy allows it.

What does a guarantor need to provide?

A guarantor usually needs to provide evidence that they own suitable property and understand the risk.

The lender may ask for:

• identification documents
• title details
• current mortgage statements
• property valuation
• evidence of income, in some cases
• evidence of assets and liabilities
• consent from all owners of the guarantor property
• independent legal advice certificate
• independent financial advice certificate, where required
• signed guarantee documents

If the guarantor property is jointly owned, all owners may need to agree.

Does the guarantor need to own their home outright?

Not always.

A guarantor may still be accepted if they have a mortgage, provided there is enough usable equity in the property.

The lender may look at:

• property value
• current loan balance
• available equity
• existing lender
• repayment history
• property type
• location
• whether the property is acceptable security
• whether the guarantor can afford their own debts

A guarantor with a small mortgage and strong equity may be acceptable. A guarantor with limited equity may not be able to provide enough support.

How much equity does a guarantor need?

The amount of equity needed depends on the borrower’s loan, deposit, property price and lender policy.

A lender may calculate whether the combined security position is acceptable.

For example, the guarantor may need enough equity to cover:

• the borrower’s deposit shortfall
• the amount needed to reduce the borrower’s effective LVR
• lenders mortgage insurance exposure
• purchase costs, where allowed
• a limited guarantee amount set by the lender

The guarantor usually does not need to secure the whole loan if the structure is set up as a limited guarantee.

Can a guarantor help avoid LMI?

Yes, a guarantor can sometimes help the borrower avoid lenders mortgage insurance.

LMI usually applies when the borrower contributes a small deposit and borrows more than 80% of the property value.

A guarantor may provide additional security so the lender’s risk is reduced.

This can allow the borrower to:

• borrow with a smaller personal deposit
• avoid or reduce LMI
• use the guarantor’s equity instead of paying a large insurance premium
• enter the market sooner
• keep more cash available after settlement

Avoiding LMI can be a major benefit, but the guarantor is taking on risk in exchange.

Can you buy with no deposit using a guarantor?

It may be possible with some lenders, but it depends on the full application.

A no-deposit guarantor loan may still require money for:

• stamp duty
• legal fees
• settlement adjustments
• inspections
• moving costs
• upfront lender fees
• insurance
• other purchase costs

Some lenders may allow the guarantor structure to cover part of the deposit shortfall. Others may still want the borrower to contribute some savings.

A borrower with no deposit may need a very strong overall application.

Do you need genuine savings with a guarantor?

Some lenders may be more flexible on genuine savings where a guarantor is involved.

Others may still want evidence that the borrower can manage money and afford repayments.

A lender may review:

• savings history
• rent payment history
• account conduct
• spending behaviour
• credit card use
• Buy Now Pay Later use
• personal debts
• employment stability

Even with a guarantor, the borrower still needs to show they can afford the loan.

What types of property can be used as guarantor security?

Lenders usually prefer standard residential property as guarantor security.

This may include:

• houses
• townhouses
• villas
• standard residential units
• acceptable apartments
• owner-occupied homes
• investment properties

Some property types may be harder to use as guarantor security, including:

• very small apartments
• serviced apartments
• student accommodation
• company title units
• rural properties
• vacant land
• commercial property
• properties in remote locations

The guarantor’s property needs to be acceptable to the lender.

Can an investment property be used as guarantor security?

Yes, some lenders may allow an investment property to be used as guarantor security.

The lender will usually review:

• property value
• current loan balance
• rental income
• existing mortgage repayments
• property type
• location
• ownership structure
• available equity
• whether all owners consent

If the investment property is owned in a company, trust or SMSF, the structure may become more complex or may not be acceptable.

Can a guarantor be retired?

A retired guarantor may be accepted by some lenders, but the application can be more carefully assessed.

The lender may look at:

• age
• income
• assets
• existing debts
• property equity
• retirement income
• understanding of the guarantee
• whether the guarantee creates hardship risk
• independent legal advice
• independent financial advice

Some lenders may be cautious if the guarantor has limited income or would struggle if the guarantee were called on.

Can pensioners be guarantors?

Some lenders may consider pensioner guarantors, but this is often more sensitive.

A lender may review whether the guarantor understands the risk and whether providing the guarantee could place them under financial stress.

The lender may ask:

• is the guarantor receiving Age Pension?
• do they have other income?
• do they own the property outright?
• are they relying on the property for retirement security?
• could they afford their own obligations if something went wrong?
• have they received independent advice?

Guarantor arrangements involving older family members should be considered very carefully.

What risks does a guarantor take?

A guarantor takes on serious financial risk.

If the borrower does not repay the loan, the lender may be able to pursue the guarantor under the guarantee.

This could lead to:

• the guarantor having to pay the guaranteed amount
• the guarantor needing to refinance
• the guarantor’s property being at risk
• legal action
• credit issues for the guarantor
• family conflict
• difficulty selling or refinancing the guarantor property

The guarantor should not sign unless they understand the possible consequences.

What risks does the borrower take?

The borrower also needs to understand the structure.

A guarantor loan can help you buy sooner, but it may create pressure if repayments become difficult.

Risks for the borrower may include:

• family member property being linked to the loan
• pressure to refinance or release the guarantee quickly
• reduced flexibility if circumstances change
• complications if the borrower sells, separates or refinances
• emotional pressure if repayments fall behind
• potential family conflict

The loan needs to be affordable without relying on the guarantor to make repayments.

Does the guarantor make repayments?

Usually, no.

The borrower makes the normal home loan repayments.

The guarantor generally only becomes involved if the borrower fails to meet their obligations and the lender takes action under the guarantee.

That said, the guarantor may still have obligations while the guarantee is in place.

They may need lender consent before:

• selling their property
• refinancing their property
• increasing their own mortgage
• changing the ownership structure
• using their equity for another purpose

This is one reason guarantors often want the guarantee released as soon as possible.

Can the guarantee be limited?

Yes, many guarantor loans use a limited guarantee.

A limited guarantee means the guarantor is only guaranteeing a specific amount, rather than the full loan.

For example, the guarantor may guarantee $100,000 rather than the full $700,000 loan.

The guaranteed amount may be linked to:

• the deposit shortfall
• the amount above 80% LVR
• LMI avoidance
• purchase costs
• the lender’s required security position

A limited guarantee can reduce risk compared with an unlimited guarantee, but it still needs to be taken seriously.

When can the guarantor be released?

A guarantor may be released once the borrower has enough equity and the lender agrees.

This may happen through:

• property value growth
• loan repayments
• extra repayments
• refinance
• sale of the property
• paying down the guaranteed portion
• reducing the loan below a target LVR

The lender may require a valuation before releasing the guarantor.

The borrower usually needs to show the remaining loan is acceptable without the guarantor security.

How long does a guarantor stay on the loan?

There is no fixed timeframe.

A guarantor may stay on the loan for a few years or longer, depending on property growth, repayments and lender policy.

The guarantee may be released sooner if:

• the property value increases
• the borrower pays down the loan quickly
• the borrower refinances
• the borrower makes extra repayments
• the borrower’s income improves
• the loan reaches the lender’s required LVR

The guarantee may last longer if:

• property values fall
• repayments are interest-only
• the loan balance remains high
• the borrower cannot refinance
• lender policy changes
• the property is difficult to value or sell

Borrowers and guarantors should discuss the expected release plan upfront.

Can you refinance a guarantor loan?

Yes, refinancing a guarantor loan may be possible.

A borrower may refinance to:

• release the guarantor
• get a lower interest rate
• change loan structure
• remove the guarantee
• consolidate debts
• access equity
• move to another lender

The new lender will usually assess:

• current property value
• loan balance
• LVR without guarantor support
• borrower income
• repayment history
• credit conduct
• whether LMI applies
• property type

If there is not enough equity, the guarantor may need to remain in place or the borrower may need to pay LMI to refinance.

Can a guarantor loan be used for an investment property?

Some lenders may allow a guarantor structure for investment property, but many guarantor loans are more common for owner-occupied purchases.

The lender may consider:

• loan purpose
• borrower income
• rental income
• property type
• guarantor relationship
• guarantor security
• maximum LVR
• risk to guarantor
• whether the structure fits policy

Investment guarantor loans may be more limited than first-home buyer owner-occupied guarantor loans.

Can a guarantor help if you have bad credit?

A guarantor may help with deposit or security, but it does not remove credit-history concerns.

The lender still needs to assess the borrower’s credit conduct.

A guarantor may not be enough if the borrower has:

• recent defaults
• unpaid debts
• bankruptcy history
• poor bank conduct
• recent missed repayments
• payday loan reliance
• too many credit enquiries
• unaffordable debts

Some specialist lenders may consider guarantor support with credit issues, but policy and pricing may differ.

Can a guarantor help if you are self-employed?

A guarantor may help with deposit or LVR, but the self-employed income still needs to be acceptable.

The lender may ask for:

• personal tax returns
• business tax returns
• notices of assessment
• financial statements
• ABN history
• BAS, where relevant
• business bank statements
• accountant letter, where relevant

If the borrower cannot verify income properly, a guarantor may not solve the problem.

Related research: Can You Get a Home Loan with Simple Self-Employed Verification?

Can a guarantor help if you are on parental leave or probation?

A guarantor may help reduce LVR, but the lender still needs to be comfortable with income.

If you are on parental leave, the lender may need evidence of:

• return-to-work date
• return-to-work income
• leave income
• savings buffer
• childcare costs

If you are on probation, the lender may need evidence of:

• employment contract
• payslips
• same-industry history
• probation end date
• ongoing employment

The guarantor supports the security position. They do not replace the need for acceptable income.

Related research: Can You Get a Home Loan While on Maternity Leave or Parental Leave?

What documents are needed for a guarantor home loan?

A guarantor home loan usually requires documents for both borrower and guarantor.

Borrower documents may include:

• payslips
• employment contract
• tax returns, if self-employed
• bank statements
• savings statements
• credit card statements
• personal loan statements
• identification
• contract of sale
• deposit evidence

Guarantor documents may include:

• identification
• property title details
• mortgage statements
• valuation access details
• income documents, where required
• asset and liability statement
• independent legal advice certificate
• independent financial advice certificate, where required
• signed guarantee documents

The document list can be longer than a standard home loan.

What is independent legal advice?

Independent legal advice means the guarantor speaks with a solicitor who explains the guarantee and the risks before they sign.

The solicitor may explain:

• what the guarantor is agreeing to
• the amount being guaranteed
• when the lender can call on the guarantee
• what happens if the borrower defaults
• whether the guarantor’s property is at risk
• how the guarantee can be released
• what documents are being signed

Many lenders require independent legal advice for guarantors.

What is independent financial advice?

Some lenders may also require independent financial advice.

This may involve a financial adviser explaining how the guarantee could affect the guarantor’s broader financial position.

This may be especially important if the guarantor is retired, close to retirement, has limited income or relies heavily on the property being offered as security.

10 common mistakes with guarantor home loans

1. Do not assume every lender offers guarantor loans.
2. Do not assume a guarantor removes the need for serviceability.
3. Do not use a guarantor without understanding the risks.
4. Do not assume any family member can act as guarantor.
5. Do not assume the guarantor can be released automatically.
6. Do not ignore the guarantor’s own mortgage or equity position.
7. Do not forget independent legal advice.
8. Do not assume a guarantor can fix bad credit.
9. Do not leave the guarantor documents until settlement week.
10. Do not apply before checking lender policy.

How to improve your chances before applying

Before applying for a guarantor home loan, it helps to prepare both sides of the application.

Useful steps include:

• confirm who the guarantor will be
• check the guarantor’s property value
• check the guarantor’s current mortgage balance
• confirm all property owners are willing to provide support
• discuss the risks early
• prepare borrower income documents
• reduce unnecessary debts where practical
• keep bank statements clean
• confirm the maximum purchase price
• understand when the guarantor may be released
• get legal and financial advice
• compare lender policy before submitting the application

The goal is to make the structure clear and safe for everyone involved.

Should you use a guarantor or save a bigger deposit?

This depends on your situation.

A guarantor may help if:

• you have strong income
• your deposit is small
• you want to avoid LMI
• a family member has strong equity
• the loan is affordable
• everyone understands the risk

Saving a bigger deposit may be better if:

• the guarantor is uncomfortable
• the guarantor has limited equity
• the borrower’s income is tight
• family risk is a concern
• the property market is uncertain
• waiting will significantly improve options

There is no single right answer. The structure should suit both the borrower and guarantor.

Example scenarios

Scenario 1: First-home buyer with strong income and small deposit

You have stable employment and can afford the repayments, but you only have a small deposit.

Your parents own their home with strong equity.

Some lenders may consider a guarantor loan to help you buy sooner and avoid LMI.

Scenario 2: Guarantor still has a mortgage

Your parents have a mortgage on their property but also have significant equity.

The lender may assess whether there is enough usable equity to support the guarantee.

Scenario 3: Retired guarantor

Your parent is retired and owns their property outright.

Some lenders may still consider the guarantee, but they may look closely at age, income, assets and independent advice.

Scenario 4: Borrower has recent credit issues

You have a small deposit and recent missed repayments.

A guarantor may help with security, but the lender may still decline if the credit conduct is not acceptable.

So, can you get a home loan with a guarantor?

Yes, you may be able to get a home loan with a guarantor in Australia.

The strongest applications usually have:

• close family guarantor
• suitable guarantor property
• enough guarantor equity
• stable borrower income
• clean borrower credit history
• manageable borrower debts
• clear guarantee amount
• independent legal advice
• realistic release plan
• a lender whose policy accepts guarantor loans

A guarantor loan can be powerful, but it should be used carefully because the guarantor’s property may be at risk.

Need help with a guarantor home loan?

A mortgage broker can help compare lenders that may accept guarantor home loans, family pledge security, limited guarantees and low-deposit purchases.

We can review the borrower’s income, deposit, debts, guarantor property, available equity and lender options before you apply.

If a parent or family member is helping you buy, speak with a mortgage broker who understands how different lenders assess guarantor loans.