Can I buy a home with no deposit using a guarantor?

Close to it — a guarantor lets you borrow up to 100% of the purchase price plus costs, where without one you'd typically need a deposit plus LMI. ANZ, for example, will lend up to 107% of the purchase price under a security guarantee, which covers the price plus stamp duty and fees, so a buyer with little saved deposit but strong income can still proceed. The trade-off is that you need a guarantor with enough equity in their property to cover the gap, and you need the income to service the full loan — the guarantee solves the deposit problem, not the serviceability one. We model whether your income carries the full borrowing before relying on a guarantee.

Which lenders are best for guarantor loans?

ANZ has one of the most streamlined security guarantees on the market: it isn't interested in the guarantor's income (a retiree or pensioner parent is fine), it doesn't mandate independent legal advice in every case, it will sit as a second mortgage behind the guarantor's existing lender so the parents don't have to refinance, and it works for investment purchases as well as owner-occupied — typically lending to 107% of the purchase price. St George's Family Pledge is also strong: the guarantor's income isn't assessed, a pensioner guarantor is fine, it allows a second mortgage behind another lender, it's portable, and there's no break cost if the guarantor later sells — but it does require the guarantor to obtain independent legal advice. The right choice depends on whether the parents bank elsewhere, whether the purchase is investment, and how the guarantee will be released.

What is the guarantor actually risking?

With a limited guarantee, the guarantor's exposure is capped at the guaranteed amount — not the whole loan. If the borrower defaults and the lender has to recover, the lender's claim against the guarantor is limited to that defined slice (for example, the ~$150,000 that took the loan from 80% to 95%), secured against the guarantor's property. The guarantor is not liable for the borrower's monthly repayments and is not a co-borrower. That said, going guarantor is a serious commitment: in a worst case the guarantor's property is on the hook for the guaranteed amount, and most lenders require (and we always recommend) that the guarantor obtain independent legal advice so they understand exactly what they're signing. A guarantee should be entered with eyes open and a clear plan to release it.

How is a guarantee released?

The guarantee is designed to be temporary. It can be released once your loan-to-value ratio falls below 80% on your own property alone — at which point the guarantor's security is no longer needed and the lender discharges it. That happens through some combination of three things: paying the loan down, the property growing in value, or both. When you think you've crossed the 80% line, we order a revaluation of your property; if it confirms the loan is now 80% or less of value, we lodge the guarantee release with the lender. Many guarantees are released within a few years. Planning the release from the start — and tracking the LVR — is part of doing a guarantor loan properly, not an afterthought.

Does a guarantor home loan avoid LMI?

That's the main financial benefit. Lenders mortgage insurance applies when you borrow above 80% of the property value — and on a high-LVR purchase it can run to tens of thousands of dollars, paid by you to protect the lender. A limited guarantee brings the effective loan-to-value ratio back to 80% by adding the guarantor's security, so LMI doesn't apply and you also typically access better pricing than a high-LVR loan. The saving has to be weighed against the seriousness of asking a family member to pledge their property — but for many buyers, a guarantee that's well-structured and released within a few years is far cheaper than paying LMI. The LMI break-even calculator on this site shows the comparison for your numbers.

Guarantor · family pledge · LMI avoidance

Guarantor home loans — a limited pledge that covers the gap, not the whole loan.

Q: How does a guarantor home loan work?

A family member — usually a parent — offers the equity in their own property as additional security for part of your loan. The guarantee is almost always a 'limited guarantee' or 'security guarantee': it covers only the gap that takes your borrowing above 80% of your property's value, not the whole loan. Say you're buying for $600,000 with a $30,000 deposit. Without a guarantee you'd be borrowing 95% and paying lenders mortgage insurance (LMI). With a limited guarantee of about $150,000 secured against your parent's home, the lender treats the deal as an 80% loan — so the LMI disappears and the pricing improves. The guarantee is capped at that limited amount, and it can be released later. The guarantor is not lending you money and is not responsible for your repayments — they are pledging equity to cover a defined slice of the loan.

Q: Who can be a guarantor?

Most lenders limit guarantors to immediate family — usually parents, and sometimes grandparents or siblings depending on the lender. The guarantor needs enough equity in their property to cover the limited guarantee amount, and the property has to be acceptable security. The guarantor's income generally doesn't matter for a security guarantee (which is why a retired or pensioner parent can be a guarantor), because they're pledging equity, not servicing the loan. The guarantor's own mortgage, if they have one, can usually stay where it is — lenders like ANZ and St George will take a second mortgage behind the guarantor's existing lender rather than forcing them to refinance.

Q: Can I use a guarantor for an investment property?

Yes, with the right lender — a guarantee is not limited to first-home or owner-occupied purchases. ANZ's security guarantee works for investment purchases as well as owner-occupied, and St George's Family Pledge can also be used for investment. The mechanics are the same: a limited guarantee covers the gap above 80% to remove LMI and improve pricing. It's a useful structure for a buyer with strong income and equity-rich parents who wants to get into an investment without tying up a large cash deposit — provided the income services the full borrowing and there's a clear plan to release the guarantee.

A family guarantee lets a buyer with a small deposit borrow up to 100% of the price plus costs and skip lenders mortgage insurance — by using a parent's equity to cover only the slice that takes the loan above 80%. It is a limited guarantee: capped to that gap, releasable once the loan reduces, and not a co-loan. This page explains the mechanics, the lenders that structure it best, what the guarantor is actually exposed to, and how the guarantee comes off.

The short version

A limited (security) guarantee uses a parent's home equity to cover the gap above 80% LVR — so LMI disappears and pricing improves. It's capped to that gap (not the whole loan), the guarantor's income isn't assessed, and it can be released once your LVR falls below 80%.

ANZ has one of the most streamlined structures (no guarantor income, often no mandatory legal advice, second mortgage behind the parents' existing lender, works for investment, to 107% of price); St George's Family Pledge is also strong (pensioner guarantor fine, portable, legal advice required).

How a limited guarantee actually works

The key word is "limited". The guarantor pledges equity to cover a defined slice of the loan — not the whole thing, and not your repayments.

Take a $600,000 purchase with a $30,000 deposit. Without help you'd borrow 95% and pay LMI that can run into the tens of thousands. With a limited guarantee of about $150,000 secured against a parent's home, the lender treats the deal as an 80% loan — LMI no longer applies, and you typically get sharper pricing than a high-LVR loan. The guarantee is capped at that $150,000; the guarantor is not lending you cash and is not on the hook for your monthly repayments. ANZ will go to 107% of the purchase price under this structure, which covers the price plus stamp duty and fees — so a strong-income buyer with little saved can still proceed. The guarantee solves the deposit problem, not serviceability: you still need the income to carry the full loan, which we model first. The LMI break-even calculator shows the saving for your numbers.

The lenders that structure it best

Most lenders offer a guarantee; a few make it genuinely easy. Positions are indicative and confirmed before any application.

Lender	Guarantor terms	Notable
ANZ	Security guarantee; no guarantor income assessed; often no mandatory independent legal advice; second mortgage behind the parents' existing lender OK	To 107% of price; works for investment as well as owner-occupied; one guarantee per customer
St George Family Pledge	Guarantor income not assessed; pensioner guarantor fine; second mortgage behind another lender OK; independent legal advice required	Portable; no break cost if the guarantor later sells; investment OK

The parents usually don't have to move banks

A common worry is that going guarantor means the parents have to refinance their own home loan. With ANZ and St George it generally doesn't — the lender takes a second mortgage behind the guarantor's existing lender, so the parents' loan stays exactly where it is.

What the guarantor is actually exposed to

Going guarantor is serious — but a limited guarantee is far narrower than people fear.

The guarantor's exposure is capped at the guaranteed amount — the defined slice (say $150,000) that took the loan from 80% to 95% — not the whole loan, and not your monthly repayments. If the borrower defaulted and the lender had to recover, its claim against the guarantor would be limited to that amount, secured against the guarantor's property. The guarantor is not a co-borrower. Even so, in a worst case the guarantor's home is on the hook for the guaranteed amount, which is why most lenders require — and we always recommend — that the guarantor obtain independent legal advice before signing, so they understand exactly what they're agreeing to. A guarantee should be entered with a clear plan to release it.

Getting the guarantee off — the release plan

The guarantee is meant to be temporary. Plan the exit from day one.

The guarantee can be released once your loan-to-value ratio falls below 80% on your own property alone — at which point the guarantor's security is no longer needed and the lender discharges it. You get there through some mix of paying the loan down and the property growing in value. When you think you've crossed the line, we order a revaluation of your property; if it confirms the loan is 80% or less of value, we lodge the guarantee release with the lender and the parents' home comes off the file. Many guarantees are released within a few years — tracking the LVR and timing the revaluation is part of doing this properly.

See whether a guarantee beats paying LMI for you.

We'll model whether your income carries the full loan, compare the cost of a guarantee against LMI, structure it with the lender that fits (and won't make the parents refinance), and set the release plan up front.

Talk through a guarantor loan → LMI break-even calculator →

What this page is, and what it isn't.

This is general information about credit, not personal credit advice, and not legal advice. A guarantor should obtain their own independent legal advice before entering a guarantee — we always recommend it, and most lenders require it. Lender policies, LVRs and the 107% figure are indicative, vary by file, and are confirmed before any application. Your full situation and requirements — and the guarantor's — are assessed before any loan is recommended or accepted.

Guarantor home loan questions

How does a guarantor home loan work?

A parent pledges equity in their home as additional security for the slice of your loan above 80% — a limited guarantee. On a $600k purchase with a $30k deposit, a ~$150k guarantee makes it an 80% loan, so LMI disappears and pricing improves. The guarantee is capped at that amount; the guarantor isn't lending cash or covering your repayments.

Can I buy with no deposit using a guarantor?

Close — a guarantee lets you borrow up to 100% plus costs; ANZ goes to 107% of price (covering stamp duty and fees). You still need the income to service the full loan and a guarantor with enough equity. The guarantee solves the deposit, not serviceability.

Which lenders are best?

ANZ (no guarantor income, often no mandatory legal advice, second mortgage behind the parents' lender, investment OK, 107%) and St George Family Pledge (pensioner guarantor fine, portable, legal advice required). Choice depends on where the parents bank and whether it's investment.

What is the guarantor risking?

With a limited guarantee, only the capped guaranteed amount (e.g. ~$150k) secured against their property — not the whole loan or your repayments. It's still serious; the guarantor should get independent legal advice, and there should be a clear release plan.

How is the guarantee released?

Once your LVR falls below 80% on your own property — via repayments, growth, or both. We order a revaluation; if it confirms ≤80%, we lodge the release. Many come off within a few years.

Who can be a guarantor?

Usually parents (sometimes grandparents/siblings), with enough equity in an acceptable property. Income generally doesn't matter for a security guarantee, so a retired or pensioner parent qualifies, and their own mortgage can usually stay put behind a second mortgage.

Can I use a guarantor for an investment property?

Yes — ANZ's security guarantee and St George's Family Pledge both allow investment, not just owner-occupied or first homes. Same mechanics: cover the gap above 80% to remove LMI.

Does it avoid LMI?

Yes — that's the main benefit. Bringing the effective LVR to 80% means no LMI (which can be tens of thousands at high LVR) plus better pricing. Weigh the saving against the seriousness of the pledge; the LMI break-even calculator shows the comparison.

Primary sources

ASIC MoneySmart — Going guarantor on a loan — independent guidance on guarantor obligations and risks.
ASIC MoneySmart — Lenders mortgage insurance — what LMI is and when it applies.
National Credit Code (Schedule 1, National Consumer Credit Protection Act 2009) — the disclosure and guarantee provisions for guarantors.
AFCA — the external dispute scheme covering guarantee disputes.
ASIC — Responsible lending (RG 209) — the lender's serviceability obligation on the underlying loan.

Richard Esteb

Licensed mortgage broker · Credit Rep #574071

Esteb & Co — authorised under Connective (ACL #389328)

A guarantor loan is a structuring job. The mechanics are simple, but the value is in choosing the lender that won't make the parents refinance, capping the guarantee tightly, making sure the income genuinely carries the loan, and planning the release from day one — so a generous family pledge does its job and then comes off.