Saving a 20% deposit while keeping up with rent and rising living costs can be challenging for many Australians. For many first home buyers and single parents, the upfront cost of homeownership is one of the biggest hurdles to overcome.
A Family Guarantee Home Loan could be the support you need to buy a home sooner. By using equity in a family member’s property as additional security, you may be able to purchase with little or no deposit, avoid LMI, and reduce the financial pressure that often comes with saving a large deposit.
With expert guidance from Unconditional Finance, the process becomes clearer and more manageable. From understanding your options to navigating lender policies, we’re here to help you move forward with confidence.
What Is a Family Guarantee Home Loan?
A Family Guarantee Home Loan allows a close family member, usually a parent, to use a portion of the equity in their own property as additional security for your loan. This arrangement can reduce or even remove the need for you to provide a full deposit, which could help you enter the property market sooner.
Instead of giving you money directly, your guarantor offers a limited guarantee backed by their home. This guarantee typically covers the deposit shortfall, which may help you avoid paying LMI and potentially increase your borrowing power. It’s a structured way to receive support from family without requiring a financial gift or cash transfer.
Family Home Guarantee Scheme for Single Parents
If you’re a single parent or single legal guardian, you may also be eligible for the Family Home Guarantee Scheme, a government initiative that supports homebuyers with a deposit as low as 2 percent. To qualify, you’ll need to:
- Be an Australian citizen or permanent resident
- Be at least 18 years old
- Have at least one dependent child
- Earn $125,000 or less per year (excluding child support)
- Plan to live in the property as your main residence
For those exploring low or no deposit home loans, combining family support with government assistance could make the path to homeownership more achievable. For more details, see the Family Home Guarantee Factsheet.
How Does the Family Home Guarantee Work?
The Family Home Guarantee is designed to make home ownership more accessible, without the need for a 20% deposit or expensive Lenders Mortgage Insurance (LMI). Here’s how the process typically works:
1. Apply through a participating lender offering loans under the Family Home Guarantee scheme.
2. If you’re eligible, the government provides a guarantee of up to 18% of the property’s value to your lender.
3. This means you only need a minimum 2% deposit, rather than the usual 20%.
4. Because the guarantee reduces the lender’s risk, you won’t need to pay LMI, potentially saving you thousands.
5. Once your loan is approved, you can move into your new home and begin repayments as normal.
This structure could significantly reduce your upfront costs. In many cases, it may save you tens of thousands of dollars, especially in high-demand areas such as Melbourne or Sydney.
Imagine you’re buying a $600,000 property. To avoid paying LMI, you’d typically need a 20 percent deposit, which comes to $120,000. If your parents have enough equity in their home, they could use it to provide a limited guarantee for that amount.
While you’re still responsible for repaying the loan, the lender sees it as less risky. This could help you avoid LMI, purchase your home sooner, and potentially secure a more competitive interest rate.
Benefits of a Family Guarantee
By using the equity in a family member’s property as additional security, you can access opportunities that might otherwise take years to reach. Some of the key benefits include:
✅ Entering the market sooner
Instead of spending years trying to save a 20 percent deposit while paying rent, you may be able to purchase a home much earlier.
✅ Avoiding Lenders Mortgage Insurance
With the guarantor’s support reducing your loan-to-value ratio, you could avoid the added cost of LMI, which may save you thousands upfront.
✅ Increasing your borrowing capacity
The added security can help improve your overall borrowing potential, giving you access to a wider selection of properties in locations that align with your needs.
✅ Receiving structured support from family
Rather than accepting a cash gift or informal assistance, a family guarantee offers a formal arrangement that clearly outlines responsibilities and protects everyone involved.
This structure allows you to take the next step toward homeownership while making the most of your family’s existing financial strength, without placing unnecessary pressure on your own savings.
Lender Policies and Eligibility Requirements
Lender criteria for loans under the Family Home Guarantee scheme can vary. Some require a minimum income, stable employment, or a certain property type and value. Others may have more flexible guidelines depending on the borrower’s financial position.
Guarantor requirements also differ. Most lenders accept immediate family members and typically require sufficient equity in the guarantor’s property. Some allow limited guarantees that cover only part of the loan, while others may ask for broader security.
Banks like CBA, NAB, and Westpac offer family guarantee loans, but each applies its own rules around deposit amounts, equity thresholds, and guarantor arrangements. Understanding these differences may help you choose a lender that aligns with your needs.
Who Can Be a Guarantor and What Are Their Responsibilities?
In most cases, a guarantor is a parent, but some lenders may also accept close relatives such as siblings or grandparents. While it might feel like a supportive gesture, acting as a guarantor carries real financial responsibility. If the borrower is unable to meet their repayments, the guarantor may be required to cover the remaining amount owed.
To reduce the level of risk, many lenders offer limited guarantees where only a portion of the loan is secured. This can reduce risk while still helping the borrower avoid a large deposit or lenders mortgage insurance.
Independent legal advice is often required before a guarantee is finalised to help ensure all parties understand the commitment and associated risks.
What Kind of Properties Can You Buy?
Most lenders allow family guarantee loans to be used for a range of residential property types, provided the home will be owner-occupied. This may include:
- Existing residential properties
- House and land packages
- Newly constructed homes
The property generally needs to be your principal place of residence, not an investment or holiday home. Some lenders may also have restrictions around location, property type, or construction status, especially when a guarantor is involved.
Reach out to our team today, and we’ll guide you through these lender-specific requirements and help ensure the property you’re considering is eligible under the loan structure that suits you best.
When Can the Guarantee Be Released?
The guarantee can usually be removed once your loan-to-value ratio (LVR) drops to 80 percent or lower. This means your loan balance is no more than 80 percent of the property’s value. Once that point is reached, you can apply to release the guarantor, giving them peace of mind and giving you full financial independence.
Release conditions vary by lender, so we’ll ensure you’re prepared for any documentation or steps involved to complete the process smoothly.
How Much Can You Borrow with a Family Guarantee Loan?
With the added security from a guarantor, some lenders may allow you to borrow up to 100 percent of the property’s purchase price. In some cases, you might also be able to borrow a little extra to help cover upfront costs like stamp duty or legal fees.
However, how much you can borrow will ultimately depend on several factors, including:
- Your income and existing financial commitments
- Your credit history and repayment capacity
- The specific lending criteria of each lender
Want to know how much you could borrow? We can help you assess your borrowing power early and match you with lenders that may suit your financial goals. Reach out to our team today or try our borrowing power calculator to get started.
Potential Risks of a Family Guarantee Loan
A Family Guarantee Home Loan can be a helpful way to get into the property market sooner, but it’s important to be aware of the potential risks, particularly for the guarantor.
Some of the key risks include:
1. Financial liability for the guarantor
If you’re unable to meet your loan repayments, the guarantor becomes responsible for the portion they’ve guaranteed. In serious cases, the lender may take legal action to recover the debt using the guarantor’s property.
2. Impact of market fluctuations
If property values fall and the guarantor needs to sell their home, they may face a financial shortfall or find it harder to refinance or access equity.
3. Strain on personal relationships
If expectations and responsibilities aren’t clearly outlined from the beginning, misunderstandings can lead to tension between family members.
These risks can often be managed with the right preparation and advice. If you’re exploring a Family Guarantee Home Loan, speaking with a mortgage broker can give you the clarity and support needed to make the right decision for you and your family.
Contact us today to discuss your options and get the right support for your situation.
Pros and Cons of Family Guarantee Loans
If you’re unsure whether a Family Guarantee Home Loan is the right fit, taking a look at the pros and cons below can help you weigh things up and decide what works best for your situation.
| Pros | Cons |
| ✔ Enter the property market sooner without needing a full deposit | ✘ Guarantors take on legal and financial obligations if repayments are missed |
| ✔ Avoid or reduce lenders mortgage insurance costs | ✘ The arrangement may impact the guarantor’s ability to borrow for their own needs |
| ✔ Boost your borrowing capacity with additional security | ✘ Requires trust, careful planning, and clear communication between all parties |
| ✔ Receive structured support from family without needing a financial gift |
How to Apply for a Family Guarantee Loan
Applying for a family guarantee loan may sound complex, but we’re here to simplify every step. Here’s how the process works with our expert support:
Step 1: Initial Conversation
We start with a friendly, obligation-free chat to understand your goals and assess if a family guarantee is right for you.
Step 2: Loan Strategy
We help determine your borrowing capacity and shortlist lenders with policies that suit your circumstances.
Step 3: Guarantor Preparation
We walk both you and your guarantor through the obligations involved, making sure everyone is comfortable and informed.
Step 4: Application and Approval
We handle the paperwork and manage communications with the lender from start to finish.
Step 5: Settlement Support
Once your loan is approved, we will support you through settlement day to make sure everything runs smoothly.
Step 6: Ongoing Guidance
After settlement, we stay in touch to help monitor your equity and guide you when it’s time to release the guarantee.
With the right support, the process becomes more manageable, less stressful, and better aligned with your individual goals. Get in touch today to explore your options with confidence.
Step Into Your First Home with the Right Support
A Family Guarantee Home Loan can be a practical way to step into the property market sooner, especially if saving a full deposit has been a challenge. But like any major financial decision, it’s important to approach it with thoughtful planning, open communication, and the right support.
Whether you’re considering the Family Home Guarantee or exploring lender options that allow family support, Unconditional Finance is here to guide you through every step. We’ll help you assess your options, explain the fine print, and move forward with clarity and confidence.
Family support could be the key to your first home. Contact us today to find out how.
Frequently Asked Questions (FAQs)
1. Can the guarantor be removed early if I refinance or repay part of the loan faster than expected?
Yes, in some cases the guarantor can be released earlier if your loan-to-value ratio improves through extra repayments or refinancing. We can help assess when this might be possible and guide you through the process.
2. Does being a guarantor affect the ability to borrow for other purposes, like a car or investment property?
It can. Lenders may factor the guarantor obligation into the guarantor’s borrowing capacity, which might reduce their ability to access new credit. This is important to consider when planning future financial goals.
3. Can someone who is self-employed or has irregular income still use a family guarantee?
Yes, it’s possible. However, self-employed applicants or those with variable income may need to provide more detailed financial documentation, such as tax returns, profit and loss statements, and bank records. Lender requirements can vary, so approval will depend on how your income is assessed.
4. Can I use a family guarantee in combination with other schemes like the First Home Owner Grant or stamp duty concessions?
Yes, you may be eligible for multiple forms of assistance. A family guarantee can often be used alongside other government grants or concessions, which could further reduce your upfront costs.
5. What types of properties are not eligible under a family guarantee loan?
Most lenders do not allow family guarantee loans to be used for properties that are not owner-occupied. This generally includes investment properties, holiday homes, and in some cases, off-the-plan purchases. Eligibility may also depend on factors like location, property type, and condition, which can vary by lender.
