The Complete Guide to Guarantor Home Loans in Australia
Buying your first home is exciting, but saving a large deposit can feel like the biggest hurdle. At Nexus Loans, one of the most common questions we're asked is:
"Do I really need a 20% deposit to buy a home?"
The answer is often no.
For many eligible buyers, a guarantor home loan can help you purchase sooner by using equity in a family member's property as additional security. This may reduce the deposit required and help you avoid paying Lenders Mortgage Insurance (LMI).
Let's break down how it all works.
What Is a Guarantor Home Loan?
A guarantor home loan allows a family member to use the equity in their property as additional security for your home loan.
Instead of gifting you money, your guarantor simply provides extra security to the lender, helping bridge the gap if you don't have a large enough deposit.
Once you've built enough equity in your own property, the guarantee may be removed, depending on the lender's requirements.
How Does a Guarantor Loan Work?
Imagine you've found your dream home but only have a 1% deposit.
Without a guarantor, you may need to:
Save for longer
Pay Lenders Mortgage Insurance (LMI)
Borrow less than you'd hoped
With a guarantor, the lender may accept your application using the equity in your guarantor's property as additional security.
This could help you:
Buy sooner
Reduce your upfront costs
Increase your borrowing capacity
Avoid paying LMI
Every lender has different policies, so it's important to speak to Jessie or the team at Nexus Loans before deciding if a Guarantor Loan is the right option for you.
Who Can Be a Guarantor?
Each lender has different requirements, but guarantors are commonly:
Parents
Stepparents
Grandparents
Siblings (with some lenders)
Close relative/friend (in some cases)
At Nexus Loans, we compare lender policies to find options that suit your family's circumstances.
What Are the Benefits?
Buy Your Home Sooner
Rather than waiting years to save a larger deposit, a guarantor may help you enter the property market sooner.
Reduce the Deposit Required
A guarantor can provide additional security instead of needing to contribute cash.
Avoid Lenders Mortgage Insurance (LMI)
Depending on your circumstances and the lender's policy, a guarantor structure may reduce or eliminate the need for LMI.
Increase Your Borrowing Power
Additional security may allow some borrowers to access a higher loan amount than they could otherwise achieve due to favorable rates and less fees.
Things to Consider
While guarantor loans can be an excellent solution, it's important that everyone understands their responsibilities.
Before proceeding, consider:
How much of the loan is being guaranteed? (usually 20% of your purchase price)
Can the guarantee be limited? (in almost all cases, yes)
When can it be removed? (Yes, as soon as you are at 80% LVR)
Does your family understand the risks involved? (speak to the team at Nexus Loans)
At Nexus Loans, we'll explain the process clearly and help ensure everyone understands how the arrangement works with a guarantor before moving forward.
Can the Guarantee Be Removed?
Yes— guarantor arrangements are designed to be temporary.
Once you've built enough equity through property growth or paying down your loan, you may be able to refinance and remove the guarantee, subject to the lender's requirements.
Common Questions We Get Asked
Do I need a 20% deposit?
Not necessarily. Depending on your circumstances and the lender's policy, there may be options available with a smaller deposit.
Can I use a guarantor to upgrade my home?
Yes. A guarantor loan isn't just for first home buyers. Some homeowners use a guarantor to upgrade to a larger home or purchase their forever home while keeping more of their savings available.
Can I use a guarantor if I already own property?
Potentially. Depending on the lender and your circumstances, some borrowers who already own one or more properties may still be eligible to use a guarantor to purchase another property or restructure their lending.
Can I use a guarantor to build a property portfolio?
Some lenders allow guarantor loans for investment properties, which may help eligible borrowers build wealth through property sooner. Lending policies vary, so it's important to seek personalised advice.
Does the guarantor give me money?
No. the guarantor doesn't provide cash. Instead, they use the equity in their property as additional security for your home loan.
Can investors use a guarantor loan?
Yes, some lenders allow guarantor arrangements for investment property purchases. Eligibility depends on the lender, the borrower's financial position, and the guarantor's available equity.
Can the guarantor be removed later?
Often, yes. Once you've built enough equity in your property or reduced your loan balance, you may be able to remove the guarantor, subject to your lender's requirements.
Why Choose Nexus Loans?
Every lender has different guarantor policies, and choosing the right one can make a significant difference.
At Nexus Loans, we take the time to understand your goals and compare a wide range of lenders to find a solution tailored to your circumstances.
Whether you're buying your first home, upgrading, investing, or simply exploring your options, we'll guide you through the process from start to finish.
Ready to Buy Sooner?
If you're wondering whether a guarantor home loan could help you purchase sooner, we'd love to help.
Book a free strategy session with Nexus Loans, and we'll explain your options, compare lenders, and help you build a personalised pathway to home ownership.
📞 0460 019 882
📧 support@nexusloans.com.au
🌐 www.nexusloans.com.au
