Guarantor Home Loans in Australia: Your Guide to Getting the Keys Sooner

The Great Australian Dream is still alive, but for many first-home buyers, one thing keeps getting in the way: the deposit. 

With the average first-home buyer deposit now sitting at $134,841 for a 20% deposit, saving can feel like a marathon with no finish line in sight. Major cities stretch this timeline even further. A guarantor home loan can help you leapfrog this barrier by using family support rather than cash, providing a smoother and often faster path to homeownership. 

What Is a Guarantor Home Loan?

A growing number of Australians now look to family for a hand up and not a handout. When entering the property market, a guarantor home loan allows you to borrow with a low or even zero deposit, using equity from a family member’s property as additional security. This structure is usually structured as a limited guarantee, in which the guarantor offers a capped portion of their property’s equity rather than guaranteeing the entire loan.

The guarantor doesn’t provide cash. Instead, they offer part of their home’s equity as security so the lender feels confident lending to you at a higher LVR (Loan-to-Value).

The Problem It Solves: LVR and LMI

To appreciate the power of guarantor home loans, you need to understand two key lending terms:

• LVR (Loan-to-Value Ratio): The loan amount compared to the property value.
• LMI (Lenders Mortgage Insurance): Extra insurance charged when your LVR exceeds 80%. According to Commonwealth Bank, LMI premiums can cost tens of thousands over the life of a loan because they’re often capitalised.

This is where guarantors come in.

The Guarantor Solution

A guarantor provides enough equity to bring your loan down to that “magic” 80% LVR. This effectively helps to avoid LMI. A cost that could otherwise run into thousands.

Example: If you’re buying a $500,000 home with a 5% deposit ($25,000), you still need another 15% ($75,000) to reach 20%.  A guarantor can offer a limited guarantee for that amount, and you bypass LMI entirely.

Who Uses a Guarantor Home Loan?

Most borrowers who explore a home loan with guarantor eligibility aren’t struggling with repayments; they’re struggling with the deposit. Typically, the most common users are first-home buyers or younger Australians with stable incomes but limited savings.

Government Guarantee Alternatives

Before opting for a guarantor home loan, a broker will compare it with government schemes that remove LMI:

• First Home Guarantee Scheme: This scheme allows eligible buyers to secure a property with a 5% deposit without LMI. From 1 October 2025, the scheme expanded with unlimited places, higher price caps, and no income limits.
• Family Home Guarantee: This scheme allows single parents and eligible family members to buy with just a 2% deposit without LMI.

However, many buyers still choose guarantor loans because they offer flexibility, often cover higher property values, and give families more control.

Guarantor Home Loan Requirements

For a smooth application, both the borrower and guarantor must meet specific guarantor home loan requirements.

Borrower Requirements

According to your mortgage, lenders look for:

• Sufficient, stable income to service the entire loan, even without the guarantor’s help. 
• A track record that shows you manage your other debts responsibly.

Serviceability must meet current lending rules. Legal home loans notes that lenders generally test affordability using a 3% interest rate buffer above the current rate.

Employment plays a role, too. As Home Loan Experts explains, many lenders prefer borrowers who have been in a full-time job for at least 3 months and are past probation.

Guarantor Requirements

The guarantor must:

• Own a property with enough equity.
• Provide a valuation to determine available equity and LVR.
• Demonstrate stable financial capacity.
• Be a close family member.

This is why the parental guarantee home loan is the most common structure.

A Focus on Family: Why Parental Guarantees Are So Popular

Parents often step into the role of guarantor to support their children while keeping financial exposure under control.

Limited Guarantee vs Full Guarantee

A limited guarantee is recommended because it caps the guarantor’s liability to the shortfall (e.g., the 15% deposit gap) plus a buffer. A full guarantee exposes the guarantor to the entire loan amount and is rarely suitable.

The Weight of the Promise: Guarantor Responsibilities

This is where things get serious. Understanding guarantor responsibilities is essential. Every guarantor must receive independent legal and financial advice before signing. A guarantor must realise:

• They may be required to repay the full amount guaranteed.
• Their property may be at risk of forced sale if the borrower defaults.
• The guarantee impacts their credit report and future borrowing.
• They can request release once LVR drops below 80%.

Understanding guarantor responsibilities is non-negotiable.

Is a Guarantor Home Loan Right for You?

A guarantor home loan is one of the most effective ways for Australians to break through the deposit barrier without waiting years to save. With 59.1% of mortgages in Australia now written through mortgage brokers, expert advice has become the preferred way to navigate these more complex loan structures.

If you’re financially ready to manage a mortgage but lack the upfront deposit, this may be the solution that finally gets you into your first home.

Ready to Apply?

If you’re exploring guarantor home loans, want clarity on guarantor home loan requirements, or need guidance on guarantor-eligible home loans, speaking to a professional makes the process smoother and safer.