By Jason Given - June 2026 - 6 min read
A guarantor loan allows a family member to use the equity in their own property as additional security for your home loan. This means you can borrow up to 100% of the purchase price (and sometimes more to cover stamp duty and other costs) without paying Lenders Mortgage Insurance.
The guarantor does not give you money. They do not make your repayments. They simply allow their property to be used as backup security. If you keep up your repayments - which is the plan - the guarantee sits quietly in the background until it can be removed.
Most lenders structure guarantor loans as a limited guarantee. The guarantor only guarantees the portion above 80% LVR, not the entire loan. This limits their exposure.
For example: you buy a $600,000 property with no deposit. 80% of $600,000 is $480,000. The guarantee covers the remaining $120,000. The guarantor's property is only at risk for that $120,000 - not the full $600,000 loan.
Their property is on the line. If you default and the sale of your property does not cover the full loan, the lender can pursue the guarantor for the guaranteed amount. This is a real risk and should not be taken lightly.
It may affect their borrowing capacity. While the guarantee is in place, the guarantor's available equity is reduced. If they want to refinance, buy another property, or access equity themselves, the guarantee may limit their options.
It is temporary. Once you build enough equity (usually reaching 80% LVR), the guarantee can be removed. Lendology plans for this from day one and lets you know when you are in a position to release the guarantor.
Guarantor loans are one of the most effective ways to get into the market sooner. Book a free chat and we will assess whether a guarantor loan works for your situation and explain the process clearly to both you and your guarantor.
Not necessarily. Most lenders accept parents, siblings, grandparents, or in some cases de facto partners as guarantors. A few lenders accept non-family guarantors. The guarantor must own property with sufficient equity and meet the lender's criteria.
The guarantor does not guarantee the entire loan. They typically guarantee only the portion above 80% LVR - the amount that would otherwise require LMI. On a $600,000 purchase with no deposit, the guarantee would cover approximately $120,000 (the difference between the loan and 80% of the property value), not the full $600,000.
Yes. Once you have built enough equity in your property - typically reaching 80% LVR through repayments and/or property value growth - you can request the lender release the guarantee. This frees the guarantor's property from any obligation. Most borrowers reach this point within 2-5 years.