Monza Finance GroupMortgage & Finance Brokers
A family guarantee lets a parent or close relative use the equity in their home as extra security for your loan. You could buy with a small deposit and avoid lenders mortgage insurance. We explain how it works to both of you, clearly and honestly.
Your guarantor is welcome to join the chat. No cost to you in most cases.
It's one of the fastest ways into your own home, as long as everyone understands what they're agreeing to.
Your guarantor doesn't hand over any money. Part of the equity in their property is used as extra security for your loan.
A guarantee can usually be limited to part of the loan, such as the gap between your deposit and 20% of the price.
The loan is yours. You still need to show the lender you can afford the repayments on your own income.
With the guarantee covering the gap, you can usually avoid lenders mortgage insurance, which can save thousands.
Once your loan is below 80% of your home's value, you can usually apply to have the guarantee removed.
Usually parents. Some lenders accept other close family, such as grandparents or siblings. Each lender has its own rules.
A guarantee is a big decision. We'll explain it to your guarantor honestly, and they should get their own independent legal advice before signing.
Being a guarantor is a serious commitment, even within a family.
The law gives guarantors important rights before and after they sign.
Talk these through as a family before you apply.
There are other ways to buy with a small deposit and no mortgage insurance.
There's no one right answer. Here's how the three most common paths compare.
| Family guarantee | Pay mortgage insurance | Save 20% | |
|---|---|---|---|
| Deposit you need | Small, sometimes none | Usually at least 5% | 20% of the price |
| Mortgage insurance | Usually none | Yes, paid upfront or added to the loan | None |
| Family involved | Yes, their property is extra security | No | No |
| When you can buy | Sooner | Sooner | Later, while you save |
First home buyer? The First Home Guarantee may let you buy with 5% and no mortgage insurance. See our first home buyer guide.
We keep the guarantee as small as possible and help release it as soon as we can.
Usually a parent. Some lenders also accept other close family, such as grandparents or siblings. Your guarantor will normally need enough equity in their own property to cover the guaranteed amount. Each lender has its own rules, so we'll find one that suits your family.
With some lenders, yes. A family guarantee can cover the full 20%, and some lenders will lend up to 100% of the price, subject to eligibility. You'll usually still need money for stamp duty and other costs, and you must be able to afford the repayments on your own income.
Not while you keep up your repayments. Your guarantor doesn't hand over any money. Part of the equity in their property is used as extra security. If you can't make your repayments, they may have to pay up to the guaranteed amount, and the property they offered as security could be at risk.
Once your loan is below 80% of your home's value, through repayments, extra payments or growth in value, you can usually apply to have the guarantee removed. The lender will normally need a new valuation. We keep track of your loan and let you know when it's worth applying.
It can. Lenders may take the guarantee into account if your guarantor applies for credit themselves, even if you're keeping up your repayments. That's one more reason to keep the guarantee as small as possible and release it as soon as you can.
Some lenders accept guarantors who are retired, as long as they have enough equity in their property. Each lender's rules are different, so we'll check before you apply.
In most cases there's no cost to you. We're paid a commission by the lender when your loan settles. If a fee ever applies, we'll tell you in writing before we go ahead.
Book a free chat, and bring your guarantor if you like. We'll explain how it works so everyone can decide with confidence.
General information only. Not financial advice. It doesn't take into account your objectives, financial situation or needs. Speak to a licensed broker about your situation.
Guarantors should get independent legal advice before signing a guarantee.
Lending criteria, fees and charges apply, and all loans are subject to lender approval.
Monza Finance Pty Ltd, ABN 21 617 504 186. Michael Barton is an Authorised Credit Representative (CRN 497244) of LMG Pty Ltd, Australian Credit Licence 390222.