How a Guarantor Can Help You Secure a Home Loan
Struggling to Save a Home Deposit? There’s Another Way
Saving for a home deposit can feel overwhelming, especially as property prices continue to rise. However, with the help of a guarantor, you may be able to fast-track your path to homeownership.
What Is a Guarantor Loan?
If you don’t have a substantial deposit, a guarantor loan can offer a practical solution. One option is a family pledge, which comes in two forms: service guarantees and security guarantees.
Service Guarantees vs Security Guarantees
According to mortgage experts, service guarantees are less common. This arrangement involves a family member guaranteeing all loan repayments and being named on the property title. However, first-home buyers who opt for this method are usually not eligible for government grants.
A security guarantee, on the other hand, is a more popular option—especially for borrowers with limited deposits. In this scenario, a relative (typically a parent) offers up the equity in their home to guarantee part of the borrower’s loan.
How Does a Security Guarantee Work?
Let’s break it down with an example:
- Suppose you require a $600,000 home loan.
- You would borrow 80% of the loan amount ($480,000) in your own name.
- The remaining $120,000 would be backed by a guarantor—reducing risk for the lender and eliminating the need for lenders’ mortgage insurance (LMI).
By structuring the loan this way, borrowers can enter the property market sooner without needing a large upfront deposit.
Why Consider a Guarantor Loan?
For many first-home buyers, a guarantor loan provides an affordable pathway to homeownership. It allows borrowers to secure financing without having to pay costly LMI fees, provided their parents or relatives own property and are comfortable with the arrangement.
However, it’s crucial that both the borrower and the guarantor understand the responsibilities involved. Seeking advice from a professional mortgage broker can help ensure a smooth and secure financial decision.
Get Expert Mortgage Advice
Navigating home loans and guarantor arrangements can be complex—but that’s where we step in. At CBM Mortgages, we specialise in helping first-home buyers find the best loan solutions tailored to their needs.
For personalised advice, give us a call at 02 8068 0534 or visit our website CBM Mortgages.
Further Reading:
- Learn more about lenders’ mortgage insurance (ASIC MoneySmart)
- Explore first-home buyer grants in NSW here (Revenue NSW)
- Read our blog on First Home Buyer schemes here
- Go to our dedicated First Home Buyers Page
- Read our blog page on Low deposit options for First Home Buyers here
- Read another blog on guarantor loan options here
- Read another blog on using Grandparents as guarantors
Disclaimer:
The information provided in this article is for general guidance only and does not constitute financial advice. Before making any decisions regarding home loans or guarantor arrangements, we recommend consulting a licensed mortgage broker or financial advisor to assess your specific situation
Written by Craig McDonald 14/06/2025
