Family Guarantee Loans: How They Work & Their Benefits

Saving for a home deposit can be challenging, especially with rising property prices. If you don’t have a 20% deposit, a Family Guarantee Loan (also known as a Guarantor Loan) can help you secure a home loan without paying Lenders Mortgage Insurance (LMI). At Mortgage Matrix, we simplify the home loan process—here’s everything you need to know about using a guarantor to buy your home.

What Is a Family Guarantee Loan?

A Family Guarantee Loan allows a family member—usually a parent—to use a portion of their home’s equity as security for your loan. This reduces the lender’s risk, helping you borrow more while avoiding LMI.

Instead of needing a full 20% deposit, the guarantor provides additional security for the shortfall, allowing you to purchase with a smaller upfront deposit (sometimes as low as 5%).

How Does a Guarantor Loan Work?

✔ You apply for a home loan as usual, but instead of a large deposit, a family member offers part of their home equity as security.
✔ The guarantor isn’t responsible for your entire loan—only the portion they guarantee (e.g., 20% of the property’s value).
✔ Once you've built enough equity or paid down your loan, the guarantee can be removed.

Benefits of a Family Guarantee Loan

💡 Buy Sooner – Avoid years of saving and enter the property market faster.

💡 Avoid Lenders Mortgage Insurance (LMI) – With a guarantor covering the deposit shortfall, you save thousands by skipping LMI.

💡 Borrow More – You may qualify for a higher loan amount, allowing you to purchase a home that better suits your needs.

💡 Flexible Exit Strategy – The guarantor’s responsibility isn’t forever. Once your equity increases, they can be released from the guarantee.

Who Can Be a Guarantor?

A guarantor is typically an immediate family member, such as:
✔ Parents (most common)
✔ Siblings
✔ Grandparents

The guarantor must have sufficient equity in their home and meet lender requirements.

Ready to Buy Your First Home?

If you're struggling to save a deposit, a Family Guarantee Loan could be the solution. Book a free appointment with Mortgage Matrix today to discuss your options and get expert advice!

First-time buyers might also benefit from the FHOG and our complete buyer's guide.