Buying a home can often feel out of reach, especially if you’re struggling to save a deposit. That’s where guarantor home loans come in. These loan types are helping first-home buyers across Australia step into the property market sooner by leveraging family support instead of upfront cash savings.

This guide will break down how guarantor loans work, who qualifies, what the risks and benefits are, and how you can apply. Whether you're a first-home buyer or a parent hoping to assist your children, this article offers clear and reliable insights.

Let’s explore how guarantor home loans might be the key to unlocking your future home. 

What Is a Guarantor Home Loan?

A guarantor home loan allows a family member, often a parent, to offer their home equity as security for the borrower's loan. This added security helps the borrower avoid the need for a large deposit and can eliminate lenders mortgage insurance (LMI).

The guarantor doesn’t provide cash. Instead, they accept financial responsibility for the loan if the borrower defaults. The arrangement remains in place until the borrower’s loan-to-value ratio (LVR) reaches a more acceptable level, typically 80%.

Why Are Guarantor Loans Popular in Logan?

Logan is one of Queensland’s fastest-growing areas, attracting young families and first-home buyers. With rising property prices, saving a 20% deposit is becoming harder for many. Guarantor loans help overcome this challenge, providing an entry point for buyers who have stable income but limited savings.

In areas like Logan, where housing affordability is still within reach, this type of loan can give buyers a competitive edge.

Who Can Be a Guarantor?

Not just anyone can be a guarantor. Typically, lenders require the guarantor to:

• Be an immediate family member (usually a parent)
  
  
• Have substantial equity in their property
  
  
• Be an Australian citizen or permanent resident
  
  
• Show strong financial standing and good credit history
  
  

Some lenders may also allow siblings or grandparents to act as guarantors, but this varies by lender.

Benefits of Guarantor Home Loans

There are several advantages to choosing this loan structure:

• Avoid Lenders Mortgage Insurance (LMI): Saving on LMI could mean thousands of dollars.
  
  
• Buy Sooner: With no deposit required, you can enter the market faster.
  
  
• Access Better Rates: A lower LVR often means more competitive interest rates.
  
  
• Bigger Buying Power: You may be able to borrow more with added security.

Risks to Be Aware Of

Although guarantor loans have their advantages, they carry certain risks, especially for the guarantor:

• Financial Liability: If you default, the guarantor is responsible for the guaranteed portion.
  
  
• Property Risk: The guarantor’s property could be at risk if they’re unable to repay on your behalf.
  
  
• Credit Impact: If things go wrong, both parties’ credit scores can suffer.
  
  
• Relationship Stress: Mixing money and family isn’t always easy.

It’s essential for both borrower and guarantor to seek independent legal and financial advice.

How Much Can You Borrow With a Guarantor Loan?

In many cases, lenders may allow borrowers to secure up to 105% of the property value with a guarantor. This means you can cover:

• Purchase price
  
  
• Stamp duty
  
  
• Legal fees
  
  
• Other upfront costs
  
  

However, borrowing capacity will still depend on your income, credit profile, and financial commitments.

What Happens If the Loan Goes Into Default?

If you miss repayments and fall into default, the lender will first pursue you, the borrower. If the issue continues, they may seek repayment from the guarantor. In extreme cases, the lender can take legal action to recover the debt, which may involve selling the guarantor’s property.

That’s why it’s vital to have a clear repayment plan before entering this arrangement.

How and When Can the Guarantor Be Removed?

You can request the removal of a guarantor once your loan-to-value ratio drops below 80%. This typically occurs when:

• The loan balance is paid down
  
  
• The property value increases
  
  
• You refinance to a new loan

A lender will need to reassess your financial position before removing the guarantor. In most cases, a new valuation and credit check will be required.

Can You Still Use Government Grants With Guarantor Loans?

Yes. Borrowers using guarantor home loans can still apply for:

• First Home Owner Grant (FHOG)
  
  
• First Home Guarantee Scheme
  
  
• Stamp duty concessions

These incentives can significantly reduce upfront costs. Your mortgage broker can guide you through the eligibility and application process.

Is a Guarantor Loan Right for You?

Guarantor loans can be a powerful tool, but they’re not suitable for everyone. This type of loan works best if:

• You have a stable income but minimal savings
  
  
• Your family is willing and financially able to help
  
  
• You’re committed to repaying the loan responsibly

If you’re unsure, a consultation with a qualified mortgage broker can help you weigh up the pros and cons.

FAQs

What is a guarantor home loan?

A guarantor home loan allows a family member to use their home equity as security to help you qualify for a loan without a full deposit.

Who can be a guarantor in Australia?

Usually, immediate family members like parents can act as guarantors. Some lenders may accept siblings or grandparents.

Can I remove the guarantor later?

Yes, once your loan-to-value ratio falls below 80%, you can apply to remove the guarantor, subject to lender approval.

Do guarantors have to pay anything upfront?

No, guarantors don’t provide funds upfront. They only become liable if the borrower defaults and can't repay.

What if the borrower defaults on repayments?

If the borrower can’t meet repayments, the lender may pursue the guarantor for the guaranteed portion of the loan.

Is a guarantor home loan safe?

It can be safe if both parties understand their responsibilities and the borrower maintains timely repayments. Legal and financial advice is strongly recommended.

Final Thoughts

Guarantor home loans offer a valuable pathway into the Logan property market, especially for first-home buyers struggling with deposits. By using the equity in a family member’s property, you can bypass LMI and buy sooner. 

However, it’s crucial to understand the risks involved and ensure that both borrower and guarantor are on the same page.

Need help deciding if this is right for your purchase in Logan? Speak to a Logan mortgage broker at Cube Loans today. We’ll walk you through the process, answer your questions, and help secure the best loan for your situation.

Call us at 1800 774 756 to book a free personalised consultation.