For many first-home buyers in Australia, saving for a deposit is the biggest hurdle to getting into the property market. With property prices continuing to rise, even a 5% deposit can feel out of reach—let alone the full 20% needed to avoid Lenders Mortgage Insurance (LMI).
But what if you could buy a home with no deposit at all? That’s exactly where a family guarantee (or guarantor loan) comes in. As a mortgage broker, I’ve seen this strategy help countless Australians buy their first home years sooner—and it might work for you too.
What Is a Family Guarantee?
A family guarantee (also called a guarantor loan) allows a parent or close family member to use the equity in their own home as security for part of your home loan. This means you don’t need a deposit because the bank sees your loan as less risky.
How It Works
- Your family member offers a portion of their home’s equity (usually around 20% of the purchase price) as security.
- You borrow the full amount needed to buy the home.
- You avoid Lenders Mortgage Insurance (LMI), which can save you tens of thousands of dollars.
- Once you’ve paid down enough of your loan (usually when you own at least 20% equity in your home), the guarantee can be released, and your guarantor is no longer tied to your loan.
Why Consider a Family Guarantee?
✅ Get into the market sooner
With house prices rising, waiting to save a deposit can mean getting priced out. A family guarantee lets you buy now, rather than in 5-10 years when prices might be even higher.
✅ No need for Lenders Mortgage Insurance (LMI)
LMI is an extra cost banks charge if you borrow more than 80% of a property’s value. It can be $10,000-$30,000 or more—a huge expense that a guarantor loan can help you avoid.
✅ Keep your savings for other expenses
Even if you have some savings, you might want to keep them for moving costs, renovations, or a financial buffer instead of putting everything into a deposit.
Who Can Be a Guarantor?
Most banks require the guarantor to be:
- A parent (some lenders allow grandparents or siblings).
- A homeowner with enough equity in their property.
- In a stable financial position
Risks and Considerations for Guarantors
A family guarantee can be a fantastic opportunity, but it’s important for both the buyer and the guarantor to understand the risks:
🔴 Guarantors are liable if the buyer can’t pay – If you default on your loan, the bank can ask your guarantor to cover the guaranteed amount.
🔴 It can limit the guarantor’s financial options – If your guarantor wants to borrow money in the future, their bank might consider the guarantee as a liability.
🔴 It’s not a ‘set and forget’ – The guarantee stays in place until the buyer has built enough equity in their home (this can take 5+ years, depending on repayments and property value growth).
💡 How to Reduce Risk:
✔ Choose a limited guarantee – Many lenders allow the guarantee to cover just 20% of the loan instead of the full amount.
✔ Have an exit strategy – Plan to refinance or remove the guarantee as soon as you build enough equity.
✔ Get legal and financial advice – Guarantors should understand exactly what they’re signing up for.
Is a Family Guarantee Right for You?
A family guarantee isn’t for everyone, but for the right buyer, it can be a fast-track into the market. It’s best suited for:
✔ First-home buyers struggling to save a deposit but can afford loan repayments.
✔ Buyers with financially secure parents willing to help.
✔ Families who trust each other and have clear expectations.
If you’re considering this option, talk to a mortgage broker. We can help you find lenders that offer family guarantee loans, structure the guarantee properly, and ensure both you and your guarantor are comfortable with the arrangement.
🏡 The bottom line? A family guarantee can be the difference between waiting years to buy a home and stepping into the market now. If you’ve got a willing family member, it’s worth exploring!
📞 Thinking about using a guarantor? Get in touch, and let’s chat about your options.