What is a Guarantor Home Loan?

Saving up the money for a deposit on a house can be tough… especially if you’re also paying rent at the same time. Thankfully, there are solutions out there that help you secure a loan and get into a house sooner, even when you don’t have the full deposit amount.

It’s called a guarantor home loan, and it involves having someone close to you offer part of their home equity as a way to bridge the gap between your cash savings and the minimum deposit amount.

This “guarantor” is typically a parent, grandparent or other family member, and they’re essentially agreeing to have their home equity form part of the security against your first home loan. It provides the lender with assurance that if you fail to make repayments, there is someone else to turn to.

How does a guarantor home loan work?

Here’s an example. Sam wants to buy a $400,000 apartment. He’s managed to save $50,000, which is a little over 12% of the property value. Without having security of at least 20% of the property value ($80,000), a lender is going to require Sam to pay lenders mortgage insurance (LMI).

Sam’s older sister Laura, who owns a property, offers $30,000 of her own home equity as additional security for the loan. $50,000 deposit + $30,000 equity = $80,000. This gives Sam the ability to take out the loan, purchase the property, and avoid paying LMI.

Sam gets his apartment, and the lender is assured that if for whatever reason he can no longer make the repayments, Laura will make them for him.

Are you eligible for a guarantor home loan?

In order to be eligible for this type of loan, you’ll need to have a close relative who is willing to sign on as your guarantor. This relative must be a homeowner themselves, and they must have enough equity (the value of their property minus what remains on their home loan) to cover the difference between your saved deposit and the minimum security amount required for your loan.

It goes without saying that it’s a big decision to become someone’s guarantor, and so this arrangement should be thoroughly discussed before committing to a loan. Most lenders will also require that you seek independent legal and financial advice before signing the contract.

BFG Loans will find the right guarantor home loan for you

The process of applying for a guarantor home loan can be an overwhelming experience. Unlike other loan types, it involves a serious commitment not just from the homebuyer, but from a family member as well.

At BFG Loans, our highly driven brokers are well-versed in navigating this process, and we’ll work closely alongside you and your guarantor to find a suitable loan with the most optimal outcome for everyone. We’ll compare and contrast various options from our panel of more than 35+ banks and reputable lenders to find you the best rate possible.

And finally, once we’ve found the ideal guarantor home loan and the paperwork is signed, you can rest assured that you’ve contributed to a good cause. At BFG Loans, we invest 50% of profits towards building affordable housing for families in need. Finding the right loan doesn’t just get you into a home – it gives someone else a home, too.

Get in touch

Schedule a consultation to discuss guarantor home loans with our qualified and experienced brokers today. We can also assist with investment home loans, first homebuyer loans, owner-occupied loans, refinancing and more.

Hear from others how BFG is making a difference

We are so happy to have been able to work with Sam at Benevolence Financial Group on bringing our home ownership dreams to life. As first home buyers we had no idea what we were doing and whether we were even in any kind of position to purchase. Sam explained everything and patiently answered our many questions, talking us through every step of the process.

Jen

Highly recommended. Sam and his team are a highly professional group who helped us with a refinance. They were attentive, proactive, and knowledgeable in their service as they guided us through the transition.

Oliver

Sam from the BFG looked after myself and my Fiance when we got our first home purchase. Sam was very down to earth, professional and really went above and beyond to help us every step of the way. He helped us, offered us support and made sure we get through things very smoothly. he answered all our questions and was always available to chat, was very proactive and always had the answers.

Reta

I can’t recommend enough Sam, he’s caring, savy, organise, responsive and very knowledgeable, Sam really care about you and he will always procure to get the best outcome for you. Thanks so much for your help Sam, I can’t thank you enough.

Patrick

We met with Samuel and right from the start he listened to our goals and got us meeting with the relevant people. He was extremely proactive and found lenders to say yes when our current said no. Have used him many times and would recommend him to any small business owner who is trying to get ahead and set up an income for their future and future family. Look forward to continue to working with him and his team

Andrea

Samuel has been incredibly helpful guiding us through our first home purchase. He’s been incredibly patient, very responsive, and got us a great deal on our mortgage. On top of all that, his business model is geared toward socially responsible and ethically minded businesses/banks – something we really valued. It’s great to know our investment is doing something great for us, but also for others and the world. We would highly recommend this business and specifically Samuel, he’s just an absolute legend!