Are you dreaming of buying your first home but struggling to save a deposit. The good news? A family guarantee loan (sometimes called a family pledge or guarantor loan) could help you buy a property sooner with little or even no deposit and skip Lenders Mortgage Insurance (LMI) altogether.

As a mortgage broker I often talk to clients who are ready to buy but don’t have a deposit saved. This is where a family guarantee can make all the difference.

What Is a Family Guarantee Loan?

A family guarantee loan allows you to purchase a home with little to no deposit by using a family member's property as additional security.

Instead of waiting years to save a 20% deposit, you can potentially buy your home with as little as a 5% deposit, or in some cases, no deposit at all. Your family member (usually parents) uses the equity in their property to guarantee your loan reducing the lender's risk.

This means you can:

• Borrow up to 100% of the purchase price
• Potentially avoid paying Lenders Mortgage Insurance (which can save you thousands)
• Get into the property market sooner

How It Works

Let’s break it down:

• You find a property you want to buy.
• Your parents (or another close family member) agree to offer part of their home’s equity as security for your loan.
• The bank uses that equity to cover the shortfall between your deposit and the 20% threshold.
• You take out your home loan (or even an investment loan if you’re buying an investment property) with a lower risk profile and likely a better rate.
• Your family member's liability is typically limited to 20% of your loan amount

Once you’ve built up enough equity in your own property the guarantee can be released and your family member’s property is no longer tied to your loan.

Example:

Let’s say you want to buy a property worth $700,000 but you only have $20,000 saved.

Normally, you’d need a $140,000 deposit (20%) to avoid LMI, which could take years to save.

With a family guarantee loan, your parents could offer $120,000 of equity from their home as security. This means:

• You can buy now with your $20,000 savings.
• You avoid paying LMI (often $20,000+ on a loan this size).
• You start building equity in your property sooner.

Things to Keep in Mind

• The family member is taking on risk if you default. Their property could be on the line.
• It’s a good idea for them to get independent legal and financial advice.
• You should have a plan to pay down the loan quickly and release the guarantee as soon as possible.

How to Apply for a Family Guarantee Loan

Step 1: Speak with a Mortgage Broker

An experienced mortgage broker can compare different lenders' family guarantee products and find the best deal for your situation. They understand which lenders offer the most flexible terms for both home loans and investment loans.

Step 2: Get Pre-approval

Before house hunting, obtain pre-approval to understand your borrowing capacity. This gives you confidence when making offers and shows sellers you're a serious buyer.

Step 3: Complete the Application process

You will need to provide:

• Income and expense details
• Bank statements
• Property valuations

Step 4: Settlement

Once approved, you can proceed to settlement just like any other home loan.

Why Work With a Mortgage Broker

Every bank has slightly different rules around family guarantees, loan amounts, and when the guarantee can be removed. A mortgage broker can compare multiple lenders to find the one that works best for you and your family.

Whether you’re buying your first home or looking at investment loans, a family guarantee could be your ticket to getting into the market sooner.

Ready to explore your options?

We can run the numbers, explain your choices, and help you decide if a family guarantee loan is right for you.