A guarantor home loan allows a family member — typically a parent — to use the equity in their own property as additional security for your home loan. This can help you buy a home with a smaller deposit (sometimes as little as 5% or even zero) while avoiding Lenders Mortgage Insurance (LMI), potentially saving you tens of thousands of dollars.
How Guarantor Loans Work
Instead of you needing a full 20% deposit to avoid LMI, your guarantor pledges a portion of their property equity to cover the gap. The guarantor does not give you cash and does not make your repayments — they simply provide their property as security for a limited portion of your loan. Once you have built enough equity through repayments or property growth, the guarantee can be released.
Types of Guarantor Loans
Security Guarantee (Most Common)
The guarantor’s property secures a portion of your loan — typically just the amount above 80% LVR. Their liability is limited to this amount, not the full loan.
Income Guarantee
The guarantor’s income is used to strengthen your serviceability assessment. Less common and carries more risk for the guarantor.
Benefits of a Guarantor Loan
- Buy sooner — Enter the property market without saving a full 20% deposit
- Avoid LMI — Save $10,000-$40,000+ in Lenders Mortgage Insurance premiums
- Borrow up to 100% LVR — Some lenders allow zero deposit with a guarantor
- Limited guarantor risk — Security guarantees are limited to a specific dollar amount, not the full loan
- Guarantee release — Once you reach 80% LVR, the guarantee is removed and your family member’s property is freed
Who Can Be a Guarantor?
Most lenders accept parents as guarantors. Some also accept siblings, grandparents, or other immediate family members. The guarantor must own property with sufficient equity and meet the lender’s creditworthiness requirements. Your guarantor should always receive independent legal and financial advice before proceeding.
How to Release a Guarantor
You can apply to release the guarantee once your loan balance falls below 80% of your property value. This can happen through regular repayments, additional lump sum payments, or property value increases. Lagos Financial monitors your position and proactively recommends guarantee release when the time is right.
Frequently Asked Questions
Does the guarantor have to repay my loan if I cannot?
With a limited security guarantee (the most common type), the guarantor’s liability is capped at the guaranteed amount — not the full loan. However, if you default and the sale of your property does not cover the loan, the lender can call on the guarantee up to the agreed limit.
Can my parents still borrow if they guarantee my loan?
The guaranteed amount is treated as a liability when your parents apply for their own credit. This may reduce their borrowing capacity. The impact depends on the guarantee amount and their overall financial position.
How long does the guarantee last?
Until you reach 80% LVR and formally apply for release — typically 2-5 years depending on your repayments and property growth. There is no fixed term; it remains until released.
Get Expert Advice from Lagos Financial
With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.
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About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.