A guarantor loan lets someone buy a home with less deposit by using a parent's (or close family member's) property as additional security. The buyer still needs to service the loan entirely from their own income. The parent's property simply provides the lender with extra collateral, bridging the gap between the buyer's deposit and the 20% the lender would normally require.
The guarantee is limited to a specific dollar amount, not the full loan. It sits as a second mortgage on the parent's property title. Once the borrower's loan balance drops below 80% of their property's value, the guarantee is released and the parent's property is freed entirely.
This structure means no lenders mortgage insurance, no need for a full 20% deposit, and a clear path to independence for the borrower. Most guarantees release within 3 to 5 years through a combination of loan repayments and natural property growth.
Here is a typical guarantor scenario for a first home buyer in Adelaide.
Without the guarantee, this buyer would either need an additional $100,000 in savings or pay roughly $15,000 to $20,000 in lenders mortgage insurance. The guarantee bridges the gap at no direct cost, and the parent's exposure is capped at $100,000 from day one.
Most brokers focus on getting the loan approved. We focus on making sure everyone involved is genuinely comfortable before a single form is signed.
We explain the guarantee to the parents without the borrower in the room. The worst case and the likely case, in plain language, with time to think. No pressure, no rush. Parents deserve to understand exactly what they are agreeing to before emotions or family expectations get involved.
We only structure limited guarantees. The parent's exposure is capped at a specific dollar amount, never the full loan. If anything goes wrong, the maximum claim is known from the start. This is not negotiable for us. A guarantee should have a defined boundary, and we make sure it does.
We diarise the guarantee release review. We tell everyone when to expect it and who raises it. The guarantee is temporary. We make sure it feels that way. Nobody should be wondering three years later whether the guarantee is still there or who is supposed to do something about it.
If you are a parent considering becoming a guarantor, here is what we walk you through before anything is signed.
A note to parents: Most of the people reading this page are parents who have been asked to help. We understand this is a big decision. Our job is to make sure you have every piece of information you need, explained clearly, before you decide. Whatever you decide, we will support it.
These are the questions we hear in almost every guarantor conversation. They are good questions, and they deserve straight answers.
We respond to all enquiries within one business day - usually the same day.