Going guarantor - here’s what you need to know.

Let’s take a look at how much you could borrow with a guarantor, what’s involved - and why expert advice matters.

Article updated 04 May 2021

53% of Australian parents are currently considering going guarantor to help their children get into the property market sooner1

Would you ask a loved one for help to get into today’s competitive property market?

Let’s take a look at how much you could borrow with a guarantor, what’s involved - and why expert advice matters.

Saving for a home loan deposit has become increasingly difficult. Why? In a nutshell, property prices continue to rise across most of Australia2. The latest CoreLogic Hedonic Home Value Index rose at its fastest pace in 32 years, with national dwelling values rising 2.8% over March 20213.

As a result, the deposit a first home buyer needs in order to purchase a property and get their foot on the property ladder continues to grow.

For most first home buyers, saving the deposit is the single biggest hurdle they may be facing e. You may have the salary needed to comfortably afford your regular mortgage repayments, but are struggling to build up your savings.

If you're looking to buy your first home but need help getting there, enlisting the help of a guarantor may be just the ticket.

How does a guarantor loan work?

Lenders like to deal with borrowers who have a large deposit. Ideally, as a first home buyer, you will have saved at least 20% of your desired property's purchase price.

Of course, the reality is most first home buyers don't have this level of savings in their bank account. Which is where your guarantor comes in.

Getting into the market with a guarantor loan means that parents won’t have to give their kids money. Instead, they could use the equity built up in their home.

Your guarantor (which is usually an immediate family member) allows the equity in his or her own property to be used as additional security for your loan. The primary security for the loan will be your property, but the lender will also take a mortgage over your guarantor's property. This mortgage will not support the loan directly but will be used to support a guarantee from your guarantor.

What does a guarantor on a mortgage do?

Saving a decent home-buying deposit can be difficult … especially if you’re renting. But there is a solution that could get you over the line sooner - having a ‘guarantor’.

Watch this short video to find out what a guarantor is, and how they might help you get into your own home, sooner.

How much can you borrow with a guarantor?

With a guarantor loan, you could be able to borrow 100% of the property purchase price. It pays to get expert advice so you know exactly what your options are. If you’re looking to take advantage of historically low-interest rates and government incentives offered by state governments, you may not want to wait until you have a huge deposit saved.

Your local Mortgage Choice broker can walk you through the options that may be available to you and your unique situation. 

Are there risks involved?

Yes, guarantors are liable for your loan. In other words, if you default on your loan, your guarantor will become responsible for paying off your mortgage.

This is likely to be a huge financial impost on your guarantor and not something you would want to put them through.


Understanding guarantors guide

Buying a property is one of the biggest financial commitments you’ll make. A guarantor might be the helping hand you need to get into property sooner. We explain in this guide what a guarantor is, who they are, and how you can benefit.

Download now

How do I know if it's right for me?

If you're considering asking your parent to become your guarantor, or you're a parent considering becoming the guarantor on your child's home loan, speaking to your local Mortgage Choice broker is a great place to start. 

Going guarantor is not always a straightforward process. Your local Mortgage Choice broker is able to provide expert advice to ensure the loan is structured to suit your unique needs. 

Give us a call today to find out if going guarantor could be an option for you and your home buying plans!

Your local Mortgage Choice expert


Posted in: First home buyers

1 Survey of 1000 Australians commissioned by Mortgage Choice to uncover attitudes and intentions towards the property buying and home loan process.