Guarantor Home loan
A guarantor home loan allows a close relative (typically a parent) to use the equity in their home as security for part or all of your mortgage. You still need to borrow money from a lender and repay it, but your guarantor provides security for the loan that you would normally have provided in the form of a deposit.
If you can’t make your loan repayments, your guarantor is liable to cover them. If they also can’t meet the repayments, they could be faced with the bank repossessing their home. Your guarantor may choose to only guarantee a portion of the loan (like 20%) rather than all of it. Once you (the borrower) have repaid that 20% portion of the loan, the guarantor’s property is safe even if you miss future repayments. The guarantor can then ask to be released from the loan.
Who can be a guarantor?
Most lenders will generally require a guarantor to be a close family member, such as a parent or partner, though some lenders may allow other relatives to be guarantors, like a sibling or grandparent. Many banks will have different eligibility requirement, but the following usually apply:
- The guarantor’s property must be here in Australia
- A stable income
- Between the ages of 18 and 65
- A good credit report
- They must own their home outright or sufficient equity in their home (typically at least 80%)
Associated Banks
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