Family Guarantee

It’s not easy saving a deposit for a home you really want. One way around it is if a family member uses their property as security for the amount you borrow.

How does a Family Guarantee work?

Someone in your family – usually mum and dad – offer equity in their house as security for the amount that the bank won’t normally lend you. For example: 

Total house value: $400,000

  • You borrow 80% from a bank: $320,000
  • You still need 20% deposit ($80,000) + stamp duty (around $15,000)
  • Instead, a loan of $95,000 is taken over your guarantor’s house.

Important things to consider

There is a risk to the person guaranteeing your home. If you don’t meet your loan payments, they will need to cover those costs, or they may lose their property.

Once your property value increases enough e.g. from $400,000 to $500,000 over five years in the example above, you can release your family member as guarantor.

Save on insurance

The other benefit of a family guarantee is that you save thousands in LMI (Lender’s Mortgage Insurance) on the initial purchase too.