Guarantor Home Loans in Australia

What is a Guarantor Home Loan?

A guarantor home loan is a special type of mortgage where someone, usually a parent or close family member, offers their property as additional security for your home loan. This means the lender has extra assurance that the loan will be repaid, allowing them to approve your application with little or no deposit required.

Unlike co-borrowers, guarantors don’t make repayments and don’t share ownership of the property. They’re simply providing a guarantee on a portion (or all) of the loan, often just enough to bring the loan-to-value ratio (LVR) below 80%, helping the borrower avoid Lenders Mortgage Insurance (LMI).

Example:

Let’s say you want to buy a home for $600,000:

• You have $10,000 saved (which is far below the typical 20% deposit).
• Your parents own their home and agree to guarantee $110,000, enough to bring your effective deposit to 20%.
• You avoid LMI (which could have cost you $12,000+) and get approved more easily.

Who Can Be a Guarantor?

When applying for a guarantor home loan, one of the most important steps is identifying someone who qualifies and is willing to act as your guarantor. In Australia, lenders have strict eligibility rules regarding who can become a guarantor, because this person carries a significant financial responsibility.

Common Types of Guarantors in Australia

1. Parents: This is by far the most common scenario. Parents who own their home or have significant equity can guarantee a portion of their child’s home loan. Most lenders are very comfortable with this arrangement.
2. Siblings: Some lenders allow brothers or sisters to act as guarantors, provided they meet the financial criteria. This is more common among close-knit families or in situations where parents can no longer provide support.
3. Grandparents: Grandparents can also act as guarantors, but lenders may apply additional scrutiny, especially if they are retirees or on a fixed income.
4. Spouse or Partner (if not co-borrowing): If your spouse or partner isn’t applying jointly, they can sometimes be a guarantor. However, many lenders prefer that partners be added as co-borrowers instead.
5. Legal Guardians or Extended Family: In very limited cases, lenders may consider a legal guardian, uncle, or aunt, but this varies and often requires additional legal documentation.

What are the requirements for being a guarantor?

Not everyone qualifies, even if they want to help. Guarantors must meet certain financial, legal, and property ownership criteria. At Stryve Finance, we help both borrowers and guarantors understand these conditions before applying.

Key Requirements Include:

• Australian citizenship or permanent residency: The guarantor must live in Australia and have a legal right to own property here.
• Property ownership with usable equity: The guarantor must own a home (or investment property) with enough equity to secure the borrower’s loan. Typically, they must be able to guarantee at least 20% of the borrower’s loan amount.
• Sound financial standing: This includes a stable income, a good credit score, and manageable existing debts. If the guarantor is still paying off their own, lenders may apply scrutiny.
• Legal capacity and willingness: The guarantor must fully understand and legally consent to the risks involved. Most lenders require that they seek independent legal and financial advice before signing.

Full vs. Limited Guarantees

There are two main ways a guarantor can support the loan:

Stryve strongly recommends a limited guarantee, where the guarantor only secures the portion needed to avoid LMI, usually 20% of the loan value. This limits their exposure and makes it easier to release the guarantee later.

Understanding the Guarantor’s Legal Responsibility

Many assume a guarantor is just “signing a form to help”, but the legal implications are much greater. If the borrower defaults and the property is sold for less than the outstanding loan, the lender may seek repayment from the guarantor.

This could mean:

• The guarantor’s property is being used to recover the debt
• A negative impact on their credit score
• Restricted ability to refinance or borrow for themselves
• Emotional or relationship strain

Benefits of Guarantor Home Loans for Borrowers

If you dream of owning a home but struggle to save a 20% deposit, you’re not alone—especially in Australia’s rising property market. In Australia, 72% of first-time buyers report that saving for a 20% deposit is one of the greatest barriers to home ownership, with property prices rising by 6.9% annually and the average deposit now around $140,000.

By using a guarantor home loan in combination with our First Home Buyer Loans service, you can secure your property with expert guidance even with minimal savings.

At Stryve Finance, we help first-home buyers, young professionals, and even investors access the property ladder sooner—without the usual roadblocks. Here’s how a guarantor loan can work in your favour:

1. Buy a Property with Little or No Deposit

With a traditional home loan, lenders typically require a minimum 20% deposit—that’s $140,000 for a $700,000 home. With a guarantor, you may borrow up to 100% of the purchase price without any cash deposit.

Following the 2025 policy update, price caps have increased across Australia (e.g. Sydney: $1.5M, Melbourne: $950k), giving first-home buyers access to properties that were previously out of reach. A guarantor loan can help you capitalise on these new limits and buy with little or no deposit.

“We had $8,000 saved, but property prices kept rising. My parents helped by guaranteeing 20%, and Stryve approved us with zero deposit.” - Priya, NSW

2. Avoid Paying Lenders Mortgage Insurance (LMI)

If your deposit is less than 20%, most banks will charge LMI, which can add $10,000–$30,000+ to your loan just for risk coverage. A guarantor home loan allows you to bypass LMI altogether by using your property equity as security.

With a guarantor, you could save thousands and use that money for furniture, moving costs, or renovations.

3. Enter the Market Sooner

In fast-growing suburbs, waiting an extra year or two to save a bigger deposit can mean missing tens of thousands in capital growth. A guarantor home loan lets you:

• Secure your dream home before it’s priced out of reach
• Get a foot in the market before prices rise further
• Start building equity now, not later

4. Strengthen Your Application

If your credit is clean and your income is stable—but your savings are limited—a guarantor loan can help tip the scales in your favour with lenders. The extra security lowers the bank’s risk, making it easier to:

• Get approved faster
• Access better interest rates
• Borrow a higher amount (if needed)

5. Build Equity Faster

Without the drag of LMI and with potentially a smaller interest rate, your repayments start building equity in your name from day one. That equity can later be used to:

• Release your guarantor sooner
• Refinance or upgrade your home
• Fund renovations—or even invest

6. Create a Stepping Stone for the Future

Buying earlier with family help sets you up for long-term property success. Many borrowers use their first property as a launchpad to:

• Buy a second home or investment property
• Upgrade as their family grows
• Transition from renting to owning in key lifestyle locations

Risks for Guarantors

While a guarantor home loan offers incredible advantages to borrowers, it’s important not to overlook the serious financial responsibilities it places on the guarantor. Whether it’s a parent, sibling, or partner offering support, the decision to act as a guarantor should always be made with full awareness of the potential risks.

At Stryve Finance, we believe in transparent advice for both borrowers and guarantors. Here’s what every potential guarantor should know before signing on:

1. Full Legal Responsibility for the Loan (or a Portion of It)

When a guarantor agrees to support a loan, they are legally liable for the guaranteed portion of the debt, usually around 20%, but sometimes more.

If the borrower stops making repayments and the lender sells the property at a loss, the guarantor may be forced to repay the remaining balance. This could sometimes result in tens or even hundreds of thousands of dollars owed.

2. Risk to the Guarantor’s Property

The guarantor’s property (usually their home) is used as security to guarantee a loan. That means if things go wrong:

• If the borrower defaults, the lender may place a legal claim (caveat) on the guarantor’s home, preventing them from selling or refinancing until the loan is paid off.
• In worst cases, the guarantor’s home could be sold to repay the debt.

Even if this outcome is rare, the risk is real and should be taken seriously. This is why Stryve recommends choosing a limited guarantee structure and planning a release strategy from day one.

3. Impact on Credit Score and Borrowing Power

Although guarantors don’t make repayments, the loan they support is still listed in their credit file as a liability. This can impact their ability to:

• Refinance their current mortgage
• Take out a personal loan or a car loan
• Apply for an investment property loan

Additionally, if the borrower defaults, the guarantor’s credit score could be affected, even if they eventually repay the debt.

4. Relationship Strain and Emotional Stress

Money and family can be a delicate mix. If things go wrong or if communication breaks down, being a guarantor can lead to:

• Tension or resentment between family members
• Disagreements about repayments or loan terms
• Long-term emotional or financial stress

5. Difficulty Removing the Guarantee

Some borrowers and guarantors believe the guarantee is temporary, but it doesn’t disappear automatically. The guarantor must usually stay on the loan until:

• The borrower’s Loan-to-Value Ratio (LVR) drops below 80%
• The lender formally agrees to release them (based on a reassessment)

This could take several years, depending on loan repayments, property value growth, and market conditions.

How to Minimise the Risk

At Stryve Finance, we take the protection of guarantors seriously. Here’s how we reduce the risks for your family:

1. Use a Limited Guarantee: Only guarantee the amount needed to avoid LMI (typically 20%), not the full loan.
2. Plan for a Release Strategy: We work with you to track your LVR and equity growth, aiming to remove the guarantor within 2–5 years.
3. Encourage Independent Legal and Financial Advice: Most lenders require this, and ensuring the guarantor fully understands their commitment is essential.
4. Provide Transparent Loan Projections: We’ll show you how repayments, loan terms, and equity forecasts work so you and your guarantor feel confident.

Based on industry data, 63% of Australian homeowners who refinance within 5 years lower their interest rates and reduce debt. If you meet equity milestones, we help you leverage refinancing options to release your guarantor sooner and access better loan terms.

When Can the Guarantor Be Released?

One of the most common (and important) questions we get at Stryve Finance is: “How long will my guarantor be on the loan?”

The good news is that the guarantee doesn’t last forever. Guarantors can be released from the loan once certain conditions are met, and we actively help clients work toward that milestone as early as possible.

What Needs to Happen Before a Guarantor Is Removed?

Most lenders will allow a guarantor to be removed when the borrower’s Loan-to-Value Ratio (LVR) reaches 80% or lower. This means the borrower owns at least 20% equity in the property through repayments, market growth, or both. Here are the three main conditions to meet:

1. LVR of 80% or below: For example, on a $600,000 loan, you’d need to reduce the balance to $480,000 (or the home to increase in value accordingly).
2. Consistent and on-time repayments: Lenders want a stable repayment history over 12–24 months.
3. A formal reassessment by the lender: You may need to provide updated income documents and a property valuation to prove your eligibility to stand alone.

How Long Does It Take?

On average, most borrowers can release their guarantor in 2 to 5 years, depending on:

• Their repayment schedule (are you paying extra?)
• Market growth in your suburb
• Lump sum contributions you make
• Your property’s revaluation

If your property grows in value quickly, you may be able to release your guarantor within 12–24 months. At Stryve, we track this progress for you.

How Stryve Helps You Plan Your Exit Strategy

We believe in protecting both borrowers and guarantors. That’s why we design every guarantor loan with a clear exit roadmap, including:

• Calculating exact equity targets to reach 80% LVR
• Identifying lenders with flexible release policies
• Reviewing your property’s value regularly
• Proactively contacting you when it’s time to apply for release

We don’t “set and forget.” Our brokers follow up after settlement to help you track progress and apply for release at the right time.

What Happens If You Don’t Release the Guarantor?

If you don’t meet the release criteria, the guarantor will remain on the loan and liable for the full term, which could be 25–30 years. This is why a planned, proactive approach is crucial.

Stryve’s Guarantor Home Loan Process

At Stryve Finance, we know that taking out a guarantor home loan is a big decision for both the borrower and the guarantor. That’s why we’ve created a simple, transparent, and supportive process from start to finish.

Our goal is to help you secure your home sooner while protecting and fully informing your guarantor.

Here’s how it works:

Step 1: Discovery and Pre-Assessment

We begin by understanding your:

• Income and employment situation
• Deposit (if any)
• Credit history
• Long-term goals (e.g. first home, upgrade, investment)

We’ll also ask about your guarantor’s details, including their property equity and financial stability, to ensure they meet lender requirements.

As of 1 October 2025, the Home Guarantee Scheme now offers unlimited places and no longer applies income caps, meaning more buyers than ever can qualify. If a guarantor loan doesn’t suit, we’ll help you explore these expanded government-backed low-deposit options.

Step 2: Lender Comparison and Matching

Using our panel of 50+ banks and lenders, we find the most suitable option based on:

• Guarantor policies (not all banks treat them equally)
• Interest rates and product features
• Flexibility in removing the guarantee later
• Turnaround time for approvals

We’ll also compare full vs. limited guarantees and recommend the safest structure for your situation.

You’ll receive a tailored lender comparison report, including estimated repayments and exit timelines.

In Australia, around 15% of workers are self-employed, and we understand the unique challenges in documenting income. Our tailored Self-Employed Mortgage solutions can help you qualify with flexible documentation options, ensuring you get the support you need.

Step 3: Application and Documentation

We manage the paperwork and guide both parties through what’s needed:

• Payslips, bank statements, and ID from the borrower
• Property documents and mortgage info from the guarantor
• Signed declaration forms and (in most cases) proof of independent legal advice for the guarantor

We explain every form and provide guidance at every step.

Step 4: Approval and Settlement

Once the lender approves your loan:

• You’ll receive your formal loan offer
• The guarantor signs their part of the agreement
• The loan settles, and you officially own your home!

We’ll also help you with:

• First Home Owner Grant (FHOG) applications
• Government schemes (like the First Home Guarantee)
• Budgeting for settlement and moving costs

Congratulations, you’re a homeowner!

Step 5: Ongoing Support and Exit Planning

Unlike many brokers, we don’t disappear after settlement. We continue working with you to:

• Monitor your loan-to-value ratio (LVR)
• Assess opportunities to refinance
• Prepare to remove your guarantor at the earliest possible moment

You’ll receive check-ins from us with:

• Updated equity projections
• Property value alerts
• A guide to applying for guarantor release

Thanks to proactive planning and smart loan structuring, most Stryve clients are able to remove their guarantor within 2–4 years.

Compare Lender | Guarantor Policies

Not all lenders treat guarantor home loans the same way. Each bank has its rules, preferences, and approval criteria; choosing the wrong one can cost you time, money, or even your approval.

That’s where Stryve Finance gives you a critical edge. With access to over 40 lenders, we can help you compare and choose the bank that fits your unique situation as a borrower and a guarantor.

Below is a comparison of how some of Australia’s largest lenders approach guarantor loans:

Major Bank Comparison Table

What Makes a "Good" Guarantor Lender?

At Stryve, we prioritise lenders that:

• Allow limited guarantees (only 20–25% of the loan)
• Offer reasonable release timelines (2–5 years)
• Have fast approval turnarounds
• Accept a wide range of guarantor types (parents, siblings, etc.)
• Are open to combining guarantor loans with government schemes like the First Home Guarantee

Some lenders even offer fee waivers, better rates, or LMI discounts when a guarantor is used. We help you take advantage of every opportunity.

Government Assistance You Can Use with a Guarantor Loan

A common myth is that you must choose either a guarantor loan or a government home-buying scheme, but in many cases, you can use both together for maximum benefit.

At Stryve Finance, we help you layer multiple strategies—guarantor support, grants, and government guarantees—to reduce upfront costs and improve your chances of approval. Here’s a breakdown of the key government assistance programs you may be eligible for:

1. First Home Owner Grant (FHOG)

The First Home Owner Grant is a one-time, tax-free payment offered by state and territory governments to help eligible Australians buy their first new home.

• Grant amount: $10,000–$30,000 (varies by state)
• Must be for a new home or a newly built property
• Applicants must be Australian citizens or permanent residents
• Must be your first property purchase in Australia

Can I use this with a guarantor loan? Yes! If you meet the eligibility requirements, you can combine the FHOG with a guarantor loan and use the grant toward stamp duty, settlement costs, or minor upgrades.

The Australian Bureau of Statistics reports that over 200,000 new homes are built each year. If you’re building your dream home, our Construction Loans offer flexible finance solutions to support every stage of your build, from ground up.

2. First Home Guarantee (FHBG) (formerly First Home Loan Deposit Scheme)

The First Home Guarantee, backed by the Australian Government, allows eligible first-home buyers to purchase with as little as a 5% deposit. The Government is a guarantor for the remaining amount to waive Lenders Mortgage Insurance (LMI).

With the updated First Home Guarantee offering unlimited places and higher price caps from 1 October 2025, borrowers without a family guarantor now have another strong path to homeownership without LMI. We’ll help you compare both options.

However, if a guarantor isn’t available or you want to reduce the family burden, FHBG is a powerful alternative.

3. Stamp Duty Concessions or Exemptions

Several Australian states and territories offer stamp duty discounts or full exemptions for first-home buyers.

4. Other Grants and Incentives

Depending on your location, you may also qualify for:

• Regional homebuyer grants
• Shared equity schemes
• Energy efficiency home rebates

What If I Combine These with a Guarantor Loan?

By combining your guarantor support with government assistance, you can:

• Eliminate LMI
• Reduce out-of-pocket costs
• Boost your approval chances
• Buy sooner and smarter

At Stryve Finance, we ensure your loan is structured to take advantage of every available benefitand that you’re not leaving money on the table.

Guarantor Loan FAQs

Got questions about guarantor home loans? You’re not alone. At Stryve Finance, we ensure borrowers and guarantors understand every part of the process.

Here are the most frequently asked questions and our expert answers:

Speak with a Stryve Broker Today

You don’t have to figure this out alone. Whether you’re a first home buyer looking for guidance or a family member exploring how to help, Stryve Finance walks you through every step with clarity, confidence, and care.

We’re more than just mortgage brokers. We’re strategic advisors, negotiators, and your go-to team for making property dreams a reality.

What You Get with Stryve:

1. Personalised advice from expert brokers
2. Access to 50+ banks and lenders across Australia
3. Clear, honest guidance for both borrowers and guarantors
4. Support with grants, schemes, and government incentives
5. A long-term strategy to release your guarantor, not just a quick fix