A guarantor home loan uses equity in a family member's property — usually a parent — as additional security so you can buy with little or no deposit and avoid Lenders Mortgage Insurance. The guarantee is limited (typically to 20% of the purchase price plus costs) and can be released once your loan falls below 80% of the property's value, often within 2–5 years. Serviceability is still assessed on your income alone; the guarantor provides security, not repayments.
This page is for people researching guarantor home loans and related options such as family guarantor home loan, parent guarantor home loan, family guarantee mortgage. It explains how this type of finance generally works, who it may suit, the issues that can affect lender approval, common scenarios and the steps involved from initial review through to settlement or funding.
Every application is assessed on its own facts. Property or asset value, income, expenses, existing debts, credit conduct, entity structure and lender policy can all change the outcome. The information below is general and is designed to help you ask better questions before choosing a lender or loan structure.
A guarantor structure can allow an eligible family member to provide additional property security for a limited portion of the purchase. This may help a buyer purchase with a smaller cash deposit and, in some structures, reduce or avoid Lenders Mortgage Insurance. The guarantor is taking on a real financial obligation, so the structure should be understood by everyone involved.
Many family-guarantee products are designed so the guarantor supports only the amount needed to bring the loan within a target lending ratio rather than guaranteeing every dollar borrowed. The exact guarantee amount and security structure vary by lender.
The guarantee does not necessarily need to remain for the entire home-loan term. If the borrower reduces the loan or the property value increases sufficiently, the lender may allow the additional security to be released after a fresh assessment. Release is not automatic, so it should be reviewed once the borrower reaches an appropriate equity position.
Broker's Guide
What you need to qualify, what to have ready, where lender policies genuinely differ, and the mistakes we see most often. General information — every application is assessed on its own facts.
Scenario 1
Situation: Income $115k, minimal savings after moving cities, parents with a mortgage-free home.
How we'd approach it: 105% loan split: 80% on the new property plus 25% secured by the parents' home; the smaller split is paid down first so the guarantee is released quickly.
Scenario 2
Situation: Parents are 68, home owned outright, living on super.
How we'd approach it: Choose from the lenders who accept retired guarantors with a limited guarantee; solicitor advice arranged; exit plan documented.
Our Approach
We start by understanding the full scenario and what you want the finance to achieve. Depending on the transaction, our work can include:
Real Situations
Family guarantees are commonly used where income is sufficient but the buyer has not yet built a large deposit. Examples include:
Step by Step
Initial strategy call and fact-find
Review relevant income, expenses, liabilities, assets and supporting documents
Identify the main lending objective and any policy constraints
Compare suitable lenders and structures
Present the recommended option, expected repayments, fees and key conditions
Prepare and lodge the application after you decide to proceed
Manage lender questions, valuation or asset checks and approval conditions
Complete documents and settlement or funding
Review the lending again when your circumstances or lender pricing change
A loan approval is only one part of the process. Derwent Finance focuses on understanding the objective, comparing lender policy and helping manage the application from initial strategy through to settlement. We assist borrowers across Australia with home loans, refinancing, investment, construction, self-employed, complex, commercial and business finance scenarios.
Where the best outcome is to keep an existing loan or wait until the borrower’s position changes, the recommendation should reflect that rather than moving a loan simply to create a transaction.
FAQs
A family member provides additional security, usually using equity in their property.
Not necessarily. The arrangement often uses property security.
Potentially, depending on lender and structure.
Many lenders allow a limited guarantee.
Potentially, once enough equity exists and lender criteria are met.
Most lenders require independent legal advice.
Still have questions? Speak with our team
Ready to understand your options? Book a Strategy Call with Derwent Finance. We can review your current position, what you want to achieve and which lending pathways may be available.
Book a Strategy CallRelated Services
General information only. Credit assistance is subject to individual circumstances and lender criteria. Interest rates, fees, lender policy, government schemes and eligibility can change without notice. This website does not provide legal, taxation or financial advice. Content last reviewed: August 2026.
Our broker fees are free to you, so you are not out of pocket for our service. Click the Get Started button now.