Find and compare guarantor home loans

Sort By
Advertised Rate

2.09%

Variable

Comparison Rate*

2.12%

Company
Yard
Repayment

$1,285

monthly

Features
Redraw facility
Offset Account
Borrow up to 70%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

4.08

/ 5
Go to site

Winner of Best refinance home loan, RateCity Gold Awards 2021

More details
Advertised Rate

2.59%

Variable

Comparison Rate*

2.60%

Company
HSBC
Repayment

$1,359

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.13

/ 5
Go to site
More details
Advertised Rate

2.68%

Variable

Comparison Rate*

2.73%

Company
Heritage Bank
Repayment

$1,373

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.14

/ 5
Go to site
More details
Advertised Rate

1.89%

Fixed - 2 years

Comparison Rate*

2.94%

Company
Suncorp Bank
Repayment

$1,256

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.39

/ 5
Go to site
More details
Advertised Rate

2.19%

Fixed - 5 years

Comparison Rate*

3.09%

Company
Greater Bank
Repayment

$1,299

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

4.16

/ 5
Go to site
More details
Advertised Rate

2.29%

Fixed - 3 years

Comparison Rate*

3.13%

Company
Heritage Bank
Repayment

$1,314

monthly

Features
Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.64

/ 5
Go to site
More details
Advertised Rate

1.89%

Fixed - 1 year

Comparison Rate*

3.51%

Company
Greater Bank
Repayment

$1,256

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.76

/ 5
Go to site
More details
Product
Advertised Rate

2.79%

Fixed - 3 years

Comparison Rate*

4.46%

Company
CUA
Repayment

$698

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.71

/ 5
Go to site
More details

Learn more about guarantor home loans

What are guarantor home loans?

Guarantor home loans are mortgages where the applicant has a guarantor who will take responsibility for the home loan repayments should the applicant default. 

A guarantor is typically a parent or close family member of the applicant, using the value of the equity in their own home as additional security. The guarantor may agree to guarantee the full mortgage, or may choose a limited guarantee that only covers part of the loan. This may allow a borrower to buy property with a lower deposit and/or without having to pay Lender's Mortgage Insurance (LMI).

Guarantor home loans are sometimes considered bad credit home loans, as they can help applicants who don’t have a good credit score.

Who offers guarantor home loans?

Guarantor home loans are offered by a limited number of lenders in Australia. Each of these lenders has its own unique criteria – including who can and can’t be a guarantor – so check your eligibility and the product disclosure statement before completing a loan application.

How much will a guarantor home loan cost me?

Like any other home loan, the cost of a guarantor home loan will depend on your loan amount, loan term, interest rate and any fees. For example, if you took out a $400,000 guarantor mortgage over 30 years with a 4 per cent interest rate and a $10 monthly fee, you'd pay $1,920 per month, for $691,078 in total (plus stamp duty, and any other upfront or ongoing fees and charges). You can use a home loan calculator to estimate the cost of your mortgage repayments.

Keep in mind that a guarantor home loan may charge higher interest rates and fees than some other home loans on the market. Once you've had some time to make repayments on your mortgage and build up equity in your property, you may be able to refinance onto a lower-rate home loan without the need for a guarantor.

How do you compare guarantor home loans?

When comparing any loans, such as guarantor home loans or bad credit home loans, you should consider the interest rate, fees, features and repayment schedule.

Comparing guarantor mortgages can help you secure the best rate and choose the features that suit you.

When you compare loans, it’s best to pick a loan that you are confident in repaying so that you don’t default on your payments.

What are the benefits of guarantor home loans?

If you take out a guarantor home loan, you might be able to:

  • Enter the market sooner if you're a first home buyer 
  • Qualify for discounted interest rates
  • Avoid paying lender's mortgage insurance (LMI)
  • Buy a new home or investment property with a more expensive purchase price

Can you use guarantor loans alongside other government grants?

Combining a guarantor home loan with government grants and concessions may allow you to purchase property with additional support.

For example, a first home buyer may be able to use their state’s First Home Owner’s Grant (FHOG), the First Home Super Saver Scheme (FHSSS) or the federal government’s First Home Loan Deposit Scheme (FHLDS) to make up for part of the home loan’s required deposit. A guarantor may be able to cover the remaining deposit, which may also help to limit the level of risk to the guarantor.

Check with your mortgage lender and your local or federal government office to confirm the eligibility requirements for both a guarantor home loan and any other available grants or support services.

How can you improve your chances of being approved for a guarantor home loan?

To improve your chances of being approved for a guarantor home loan, check the lending criteria. Some lenders only allow a parent to be a guarantor, while others may have more relaxed rules. Choosing a guarantor who has good credit and a close personal relationship to you can help you secure a guarantor home loan.

Also, it’s important to explore ways to make yourself look like a more reliable (and therefore less risky) borrower. Here are five ways you might be able to achieve that goal:

  1. Increase your income: Get a second job, work more hours, ask for a raise
  2. Reduce your spending: Cut back on non-essentials like socialising, booze, clothes, holidays, taxis
  3. Increase your savings: Sell unwanted items
  4. Boost your employment profile: Stay in your job for longer, ask to move from casual or part-time to full-time
  5. Cut back on credit cards: Lower your credit limit or even cut up your card

Who can act as a guarantor?

Most banks only allow parents to be guarantors for home loans. Some will consider guarantees from immediate family members like siblings, grandparents, spouses, de facto partners or adult children. Close friends and workmates are usually not accepted. If your guarantor is someone other than your parents, you may have to meet other lending conditions to qualify as a borrower. 

How do you take out a guarantor home loan?

Taking out a guarantor home loan is a more time-consuming and complicated process than taking out an ordinary home loan.

With an ordinary home loan, only the borrower needs to provide proof of identity, income, savings and assets, but with a guarantor home loan, the guarantor also has to take all of these steps. The lender may conduct a valuation of the guarantor's property to confirm that they have sufficient equity to guarantee the loan. 

Also, the guarantor will have to provide a legal promise to pay off the mortgage in the event that the primary borrower fails to do so.

What are the pros and cons of guarantor home loans?

While guarantor home loans can have a big upside, they can also have serious consequences and so should never be entered into lightly. 

When guarantor home loans work well, they allow Australians with small house deposits and/or bad credit to become first-time home owners and enter the property market ahead of schedule, qualify for cheaper interest rates, or avoid paying lender’s mortgage insurance (LMI). In an ideal scenario, the borrowers then make all their repayments on time, so that the lender never has to trigger the guarantee.

But not all guarantor home loans go according to plan. Some borrowers fail to make repayments – perhaps because they lose their job or get a divorce. When that happens, the guarantor is expected to make the repayments. This might force parents to postpone their retirement, come out of retirement, sell the family home or some combination of the above. That in turn might lead to a breakdown in the relationship between the borrower and the guarantor.

What are some alternatives to guarantor home loans?

If you’re struggling to save up for a deposit or need a home loan with bad credit, there are alternatives to guarantor home loans. 

A parent-assisted home loan is one option, which resembles receiving a gifted deposit. As a gifted deposit won't count as genuine savings, you will have to pay back this gift to your parents with interest for it to be accepted by a lender.

Another option is to take out a mortgage with a loan to value ratio (LVR) of 95 per cent or even 97 per cent. While this means saving up a much smaller deposit compared to the property's value, you'll also need to consider the cost of Lenders Mortgage Insurance (LMI).

Both of these options are potentially risky, so it’s best to get independent financial advice first to see what may best suit your financial situation. For example, you could consider contacting a mortgage broker.

Example: Jennifer’s parents must pay

Jennifer and her partner wanted to buy their first home, and asked Jennifer’s parents to guarantee the loan. She assured them that repayments would be made on time, but a few months after securing the loan, Jennifer lost her job, her partner ended the relationship and both parties stopped making repayments. As such, Jennifer’s parents became responsible for the entire loan. Although they had agreed to act as a guarantor, the situation caused a high level of frustration and conflict between Jennifer and her parents. 

What are guarantor loans called?

When you're researching guarantor loans, remember that some lenders use different names for these loan products, such as ‘Family Pledge’, ‘Family Equity’, ‘Family Support’, ‘Family Guarantee’ and ‘Fast Track’. But whatever the name, they all refer to a security guarantee.

There are differences between every lender’s credit guidelines, loan types and discounts for family guarantee loans. Doing your own homework can lead to savings.

Should I be a guarantor?

Becoming a guarantor is a major decision so it pays to seek independent financial advice before you jump in, and try to answer these questions:

  • How big is the guarantee that you are committing yourself to? Can you cover the ongoing mortgage payments if the borrower folds?
  • When will you be liable to cough up money? Usually, banks and other lenders will proceed if the mortgage is in arrears for three to six months.
  • How credible is the person that you are acting as guarantor for? One has to be brutally honest in answering this, especially if it involves your own son or daughter.

Keep in mind that becoming a guarantor can 'tie up' the equity in your own property, so you may not be able to use it to secure other credit products. Becoming a guarantor can also affect your credit score.

How long will a guarantor home loan last for the guarantor?

Like most other mortgages, a guarantor home loan will typically run for 20 to 30 years or longer. However, a guarantor may not need to have their own finances tied up in this loan for the full mortgage term. 

Once a borrower has paid their loan for a few years, and has built up equity in their property, they may be in a position to refinance their mortgage. Depending on their financial situation, they may no longer need a guarantor when they refinance, as the equity in their property may be enough to cover the required home loan deposit.

This could let their guarantor off the hook, “freeing up” the equity in their own property for use elsewhere.

Do I need expert advice if I’m a guarantor?

Being a home loan guarantor is a big commitment and you should seek expert financial and legal advice from appropriate professionals.

It is desirable that before applying you have a preliminary discussion with your lawyer and then put the “guarantee and indemnity’ documents for legal scrutiny before signing on the dotted line.

One should also have an exit strategy in mind. For example, if the loan is for 25 years, you don't have to be involved for that period. Extra payments and refinancing can help remove the guarantee in two to five years.

The guarantor’s risk can also be minimised by their children if they procure insurance for their own mortgage so the guarantor’s property is protected.

Frequently asked questions

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

What if I can't pay off my guaranteed home loan?

If you can’t pay off your guaranteed home loan, your lender might chase your guarantor for the money.

A guaranteed home loan is a legally binding agreement in which the guarantor assumes overall responsibility for the mortgage. So if the borrower falls behind on their mortgage, the lender might insist that the guarantor cover the repayments. If the guarantor fails to do so, the lender might seize the guarantor’s security (which is often the family home) so it can recoup its money.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.

How do guaranteed home loans work?

A guaranteed home loan involves a guarantor (often a parent) promising to pay off a mortgage if the principal borrower (often the child) fails to do so. The guarantor will also have to provide security, which is often the family home.

The principal borrower will usually be someone struggling to find the money to enter the property market. By partnering with a guarantor, the borrower increases their financial power and becomes less of a risk in the eyes of lenders. As a result, the borrower may:

  • Qualify for a mortgage that they would have otherwise been denied
  • Not be required to pay lender’s mortgage insurance (LMI)
  • Be charged a lower interest rate
  • Be charged less in fees

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

What is a guarantor?

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.

Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.

Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.

However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

How does Real Time Ratings work?

Real Time RatingsTM looks at your individual home loan requirements and uses this information to rank every applicable home loan in our database out of five.

This score is based on two main factors – cost and flexibility.

Cost is calculated by looking at the interest rates and fees over the first five years of the loan.

Flexibility is based on whether a loan offers features such as an offset account, redraw facility and extra repayments.

Real Time RatingsTM also includes the following assumptions:

  • Costs are calculated on the current variable rate however they could change in the future.
  • Loans are assumed to be principal and interest
  • Fixed-rate loans with terms greater than five years are still assessed on a five-year basis, so 10-year fixed loans are assessed as being only five years’ long.
  • Break costs are not included.

What fees are there when buying a house?

Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.

Tip: you can calculate your stamp duty costs as well as LMI in Rate City mortgage repayments calculator

Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.

Keep this in mind when deciding if you are ready to make the move in to the property market.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

How can I avoid mortgage insurance?

Lenders mortgage insurance (LMI) can be avoided by having a substantial deposit saved up before you apply for a loan, usually around 20 per cent or more (or a LVR of 80 per cent or less). This amount needs to be considered genuine savings by your lender so it has to have been in your account for three months rather than a lump sum that has just been deposited.

Some lenders may even require a six months saving history so the best way to ensure you don’t end up paying LMI is to plan ahead for your home loan and save regularly.

Tip: You can use RateCity mortgage repayment calculator to calculate your LMI based on your borrowing profile