Guarantor Home Loans Mortgage Broker in Sydney
Buy with a small deposit, or none, by using equity in a family member's property as extra security. A guarantor home loan can bring your loan to value ratio (LVR) under 80%, which usually removes lenders mortgage insurance (LMI) and gets you into the market years sooner.
How a Guarantor Home Loan Works
Your guarantor offers their property as additional security for part of your loan. The lender takes a mortgage over that property, but only for the guaranteed amount, not your whole loan.
Most guarantees are limited to the amount needed to bring your LVR down to 80%. On a $900,000 purchase with a $45,000 deposit, the guarantee might cover around $135,000, and your guarantor is liable for that amount only.
You remain the borrower and make every repayment. The guarantor does not own any part of your property and is not on its title. As your Sydney mortgage broker, we set the guarantee at the lowest amount the lender will accept.
What a Guarantor Can Unlock
The benefit comes from the lower LVR, not a different product:
Buy With Little or No Deposit
Some lenders will fund up to 100% of the purchase price, and in some cases up to 105% to cover stamp duty and costs, when the guarantee is strong enough.
Avoid LMI
Keeping the combined LVR at 80% or below usually removes lenders mortgage insurance, which on a Sydney purchase can run into tens of thousands of dollars.
Access Better Pricing
Lenders often price loans at 80% LVR or under more sharply than high-LVR loans, so the rate can be lower from day one.
Buy Sooner
Instead of saving a 20% deposit while prices move, you buy once your income can service the loan.
Who Can Be a Guarantor
Lender policy varies, but a guarantor usually needs to be:
- A parent or step-parent, and with some lenders a grandparent, sibling or other close relative
- An Australian citizen or permanent resident
- The owner of Australian property with enough usable equity to cover the guarantee
- Willing to obtain independent legal advice before signing
The guarantor's property can still carry its own mortgage. What matters is the equity left above that loan once the guarantee is added.
What Lenders Check Before They Approve You
A guarantee reduces the deposit you need. It does not replace the income test:
Your Serviceability
You still need to show you can repay the full loan. The Australian Prudential Regulation Authority (APRA) requires banks to test repayments at 3 percentage points above the actual rate.
Guarantor Equity
The lender values the guarantor's property and checks that the equity covers the guaranteed amount, usually at 80% of its value.
Genuine Savings
Some lenders still want to see savings or a strong rental history, even when the guarantee covers the full deposit.
Legal Advice
Most lenders require the guarantor to receive independent legal advice and provide a solicitor's certificate before settlement.
Property Type
Small apartments, rural land and some off-the-plan purchases can be restricted or require a lower LVR, even with a guarantee.
Other Low Deposit Options
A guarantee is not the only path. Depending on your position, we also compare:
5% Deposit Scheme
The Australian Government's Home Guarantee Scheme lets eligible first home buyers purchase with a 5% deposit and no LMI, subject to property price caps.
Gifted Deposit
Family can gift cash towards the deposit instead of guaranteeing the loan. Lenders usually ask for a signed gift letter.
Paying LMI
Buying with 10% or less and paying LMI keeps family property out of the loan. The premium can often be added to the loan.
How the Process Runs From First Call Onwards
The steps stay the same on every file, though timing shifts with valuations and legal advice:
Mapping Your Position
We go through your income, savings and debts, and the guarantor's property and loan, then work out the smallest guarantee that gets you under 80%.
Comparing Lender Policy
We match your position against guarantor policy across our panel, including who can guarantee, maximum LVR and how the guarantee is released.
Securing Pre-Approval
We lodge the application, arrange valuations on both properties and manage lender questions, so you can bid with a confirmed budget.
Coordinating Settlement
We work with your conveyancer and the guarantor's solicitor so the guarantee documents and legal certificate are in place before settlement.
Releasing the Guarantee
Once your LVR reaches 80% through repayments or growth, we arrange a revaluation and apply to release the guarantor.
None of this commits you or your guarantor to a lender, and no application is lodged until you have chosen one.
What This Costs You
Broker commission is paid by the lender that funds the loan. Any fee payable by you is set out in writing in our credit guide and credit proposal before you commit, and the first conversation carries no cost.
Budget for the guarantor's legal advice, a valuation on their property and mortgage registration fees. These are usually far smaller than the LMI a guarantee avoids.
Trade-Offs Worth Knowing
Risks both of you should weigh before signing:
Guarantor Liability
If you default and the property sells for less than the debt, the lender can recover the guaranteed amount from the guarantor, up to and including selling their property.
Guarantor's Borrowing
A guarantee can reduce what the guarantor can borrow and may need to be released before they sell, refinance or retire.
Higher Debt
Buying with little deposit means a larger loan and more interest over its life. Falling prices can leave you with little equity for longer.
Family Circumstances
Separation, illness or a change in the guarantor's plans can put pressure on the arrangement. Agree on an exit plan before you sign.
Why Families Work With Us
DIY Lending is led by Di Yin and operates as a Corporate Credit Representative of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704. We are a member of the Mortgage and Finance Association of Australia and the Australian Financial Complaints Authority.
We hold access to more than 40 lenders and compare their guarantor policy on eligibility, limits and release before an application goes in. We keep the guarantee as small as possible and plan its release from the start.
Our guarantor home loans mortgage broker work keeps both borrower and guarantor informed, and every decision about their money stays with them.
See What a Guarantee Could Do
Tell us your income, savings and the value of your guarantor's property, and you will get a borrowing range, the guarantee needed to avoid LMI and the lenders that fit.
Call 02 8806 7258 or send your details through.
Frequently Asked Questions (FAQs)
How much deposit do I need with a guarantor?
Some lenders accept no deposit when the guarantee covers the gap to 80% LVR, and a few will lend up to 105% to include purchase costs. Others still ask for some genuine savings.
Who can be a guarantor on a home loan?
Usually a parent or step-parent. Some lenders also accept grandparents, siblings or other close relatives. The guarantor needs Australian property with enough equity and must receive independent legal advice.
Is the guarantor responsible for the whole loan?
Usually not. Most guarantees are limited to a set amount, often the portion needed to bring the LVR to 80%. The guarantor is liable only up to that limit.
Can my guarantor still have a mortgage on their home?
Yes, as long as there is enough equity above their existing loan to cover the guarantee. The lender values their property to confirm this.
How do I remove a guarantor from my loan?
Once your loan falls to 80% of the property value, through repayments, price growth or both, the lender can revalue the property and release the guarantee. Refinancing without a guarantee is another option.
Does a guarantor loan avoid lenders mortgage insurance?
In most cases, yes. When the guarantee brings the combined LVR to 80% or below, lenders usually do not charge LMI.
Can I use a guarantor for an investment property?
Some lenders accept a guarantee for an investment purchase, though policy is tighter than for a home you will live in. See our investment property loans for how investor lending is assessed.
This page contains general information only. It does not take your objectives, financial situation or needs into account, and it is not a recommendation to enter into any credit contract. Figures, thresholds and lender requirements change, and the outcome depends on your circumstances and the lender assessing you. Guarantors should obtain independent legal and financial advice before signing.