Guarantor Loans

When applying for a home loan, lenders assess a range of factors and borrowing amount to determine your ability to service the loan. If you don’t meet certain requirements, such as having a sufficient deposit, a guarantor loan may provide an alternative pathway to home ownership.

A guarantor loan can be backed by a close family member who is willing to offer the equity in their property as additional security for the loan. This family guarantee provides lenders with increased confidence, as additional security is available if required.

The guarantor has to demonstrate that they have sufficient equity in their property to support the guarantee. A guarantor does not need to provide cash upfront, as no money changes hands during the guarantee process. Instead, a portion of their property’s equity is used to contribute towards the security requirements of your loan.

Lender requirements for guarantor loans can vary, which is why it’s important to understand the obligations involved before proceeding. Our mortgage brokers can explain the process, discuss available options, and help you and your guarantor understand the responsibilities before making a decision.

Before entering into a guarantor arrangement, both the borrower and guarantor should carefully consider the potential risks and obligations, including what may occur if loan repayments cannot be maintained.

Before a guarantor loan can be considered, both the borrower and guarantor must meet certain lender requirements.

A guarantor is typically an immediate family member who:

• Owns property with sufficient equity to support the guarantee
• Has a strong credit history
• Meets the lender’s financial requirements, which may include stable employment

The guarantor’s property equity is used as additional security for the loan. This is calculated by subtracting the remaining mortgage balance from the current value of their property.

It’s important for both the borrower and guarantor to understand their responsibilities before entering into an agreement. If loan repayments are not maintained, the guarantor may be required to cover the guaranteed amount.

Most lenders require both parties to obtain independent legal and financial guidance before proceeding. We can communicate with you and any other parties you would like us to involve, helping ensure you have the information needed to make an informed decision.