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Looking to buy your first home or move into the property market as soon as possible? Struggling to save a large deposit for your home loan? Then a Guarantor Loan could be the right solution for your situation. We at Nice Loans can help you understand how guarantor support works and how you can secure your home loan with greater flexibility.
A guarantor loan is a type of home loan offered by lenders, where a family member (a parent or close relative) agrees to use the equity in their own property to support the loan application of a borrower. This extra security helps in meeting the requirements of a lender without the need for a large upfront deposit, often allowing you to:
Unlike in the traditional co-borrower arrangement, your guarantor doesn’t need to contribute any cash. They are only offering security to the lender and only step in when repayments can’t be made. This helps in reducing the LVR from the lender’s perspective, potentially reducing or avoiding LMI & providing access to loan options available. Find out how the loan-to-value ratio works.
If you’re struggling with a deposit, some creditors also offer no-deposit home loans. Speak with us about eligibility.
The eligible guarantor relationships vary from lender to lender. Parents & stepparents are commonly considered, while some may also accept adult children, siblings, grandparents, legal guardians or close family members. Age, income, property ownership, existing debt, residency & other requirements may still apply.
Choosing a guarantor loan may benefit you in several ways. Here are some key features of a guarantor loan:
While a guarantor loan can make it easier for a borrower to enter a market sooner, it's still important to understand both the advantages and potential risks involved with a guarantor loan:
Disclaimer: Loan suitability depends on individual financial circumstances, lender policies, and long-term property plans.
Use this calculator to illustrate the possible security shortfall & a guarantor's estimated property equity under simplified assumptions.
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Here are some frequently asked questions by our clients. If you have any specific questions, please don't hesitate to contact us.
A guarantor home loan is a type of home loan that allow your family member (most commonly a parent) to use the equity in their property as security for your loan. This will help you purchase a property with a smaller deposit and also allow you to avoid Lenders Mortgage Insurance (LMI).
Depending on the lender and your financial situation, you may only need about 5-10% deposit in many cases and sometimes no deposit at all.
Under a limited guarantee, the liability is restricted according to the guarantee’s terms. It is commonly limited to an agreed amount or specified security. However, the liability may also include interest, fees & enforcement costs.
A broader guarantee may expose the guarantor to substantially more of the borrower’s debt. The exact scope must be confirmed from the lender’s documents. Also, the guarantor should obtain independent legal advice & understand the maximum possible liability before signing.
The borrower may apply to have the guarantor released when the lender’s requirements are met. The lender may consider its current valuation, the resulting LVR, repayment history, serviceability & other criteria. The release is not automatic even though the borrower estimates that they have 20% equity.
If the borrower defaults, the lender may demand payment from the guarantor under the guarantee. Depending on the terms, it may include the guaranteed debt, interest, fees & enforcement costs. If the payment can’t be made, the property provided as security may be at the risk of sale. Also, a default may also affect the guarantor’s credit record & future borrowing.
Since the guarantor provides additional security, many borrowers can avoid paying costly Lenders Mortgage Insurance.
Some lenders may consider family-guarantee support for an investment property purchase. However, the availability is more limited & different deposit, serviceability & security requirements may apply. Investment purchases are generally not eligible for first home buyer programs that require owner occupation.
Answer a few quick questions so we can understand your situation and discuss possible options.
Select the option that best matches your situation.
Enter the purchase price, how much you'd like to borrow, and your deposit amount.
Based on your loan amount, the following estimate illustrates repayments using interest rates from 6% to 7% p.a.
How will you be securing this loan?
You may be eligible for federal and state or territory first-home-buyer assistance. Available grants, concessions, property limits and eligibility requirements depend on where you purchase.
This helps us discuss potentially suitable options available through our lender panel.
Be as honest as you can — it helps us find the right lender for your situation.
We’ll provide an indicative equity calculation and compare your existing loan with potentially suitable refinancing options available through our lender panel.
Based on your refinance amount, the following estimate illustrates repayments using interest rates from 6% to 7% p.a.
This helps us discuss potentially suitable options available through our lender panel.
Be as honest as you can — it helps us find the right lender for your situation.
Select your land situation, then enter the values. Total project value is calculated automatically.
Enter the amount you would like to borrow. The amount available is subject to lender assessment, valuation and lending criteria.
Based on your construction loan amount, the following estimate illustrates repayments using interest rates from 6% to 7% p.a.
How will you be securing this construction loan?
This helps us discuss potentially suitable options available through our lender panel.
Be as honest as you can — it helps us find the right lender for your situation.
We'll use this to get back to you, usually within one business day.
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