If you have a parent or family member with equity in their home, a guarantor arrangement can get you into the property market without LMI and without a 20% deposit. It needs to be structured correctly to protect everyone — Blambles has helped many families navigate this.
A guarantor home loan is a loan where a third party — usually a parent or close family member — provides additional security for the loan by using equity in their own property. The guarantor doesn't provide cash: instead, they agree that if the primary borrower defaults on the loan, the lender can make a claim against the guarantor's property up to the guaranteed amount.
The most common use of guarantor arrangements is to help a first home buyer purchase without a 20% deposit and without paying Lender's Mortgage Insurance (LMI). Here's how the numbers work: if you're buying a $600,000 property and have a $30,000 deposit (5%), you'd normally need to borrow $570,000 — which is 95% LVR and would attract a significant LMI premium. With a limited guarantee of $90,000 from a parent (using equity in their home), the effective deposit becomes $120,000 (20%) — taking the LVR to 80% and eliminating LMI entirely.
The guarantee is typically "limited" — meaning the guarantor's exposure is capped at a specific dollar amount (the amount needed to bring the LVR to 80%), not the entire loan. This is an important protection for the guarantor: they're not guaranteeing the full loan balance, just the portion that takes the borrower over 80% LVR. Once the borrower has paid down their loan sufficiently (or the property has grown in value) to bring the LVR below 80% on their own, the guarantee can be released — and the guarantor's property is no longer at risk.
Most lenders require the guarantor to seek independent legal and financial advice before signing the guarantee documents — which is the right thing to do. It's a significant legal obligation, and guarantors should fully understand what they're agreeing to. Blambles walks through the obligations with all parties and recommends both the borrower and guarantor get independent advice.
With a guarantor bringing the effective deposit to 20%, LMI is not required — saving thousands of dollars that would otherwise be added to the loan.
Rather than waiting 3–5 more years to save a full 20% deposit — during which property prices may rise further — a guarantor can get you into the market now.
The guarantee is typically limited to the specific amount needed to bring the LVR to 80% — not the entire loan — protecting the guarantor from full exposure.
Once the borrower has reduced their loan (or the property has grown in value) to below 80% LVR, the guarantee can be released — freeing the guarantor's property from the obligation.
The guarantor provides security — not money. They're using the equity in their own home, which doesn't require them to access or spend any of their savings.
In some circumstances, a guarantor arrangement can be used alongside other first home buyer assistance — though the interaction needs to be carefully reviewed. Blambles assesses this on a case-by-case basis.
We discuss the arrangement with all parties — what the guarantee involves, what it protects and what it commits the guarantor to — so everyone goes in with clear eyes.
We calculate the specific guarantee amount needed to bring the borrower's LVR to 80% — and confirm the guarantor has sufficient equity in their own property to provide it.
Not all lenders offer limited guarantor products. Blambles identifies lenders with the most appropriate guarantor structure and terms for your family's situation.
The lender will require the guarantor to obtain independent legal advice before signing. Blambles can recommend solicitors experienced in this area.
The loan settles. We also establish at the outset what's needed to release the guarantee in future — giving the guarantor a clear path to removing their obligation.
Guarantor lending is an area where the wrong structure — or the wrong lender — can create real problems for the guarantor down the track. Some lenders structure guarantees as unlimited rather than limited, which exposes the guarantor to the full loan balance rather than just the portion above 80%. Blambles specifically seeks out lenders who offer limited guarantees and structures the arrangement to protect the guarantor appropriately.
Access to 40+ lenders also means better rates for the borrower — because even with a guarantor arrangement, there's a wide spread of rates available and the right lender can make a material difference over the life of the loan.
Having an experienced broker managing the conversation between the borrower, the guarantor, the solicitors and the lender also reduces friction and stress in what can be a complex family financial conversation. Blambles handles this with care and professionalism.
A guarantor provides an agreement — supported by a registered mortgage or caveat over their property — that if the primary borrower defaults on their loan, the lender can recover from the guarantor's property up to the guaranteed amount. The guarantor doesn't make any repayments unless the borrower defaults. They do need to sign legal documents (usually with a solicitor present) and get independent legal and financial advice.
The guarantor needs enough equity in their own property to cover the guarantee amount — which is typically the difference between the borrower's deposit and 20% of the purchase price. For example, if the borrower is buying a $600,000 property with a $30,000 deposit, the guarantee amount is $90,000 (to make up the remaining 15% needed to reach 20%). The guarantor's property needs to have at least $90,000 of accessible equity — i.e. value above any existing mortgage.
The guarantee can typically be removed once the borrower's loan has reduced to 80% of the property's current value — either through loan repayments, property value growth or a combination of both. The borrower applies to the lender to release the guarantee, and the lender assesses the current LVR. This process is straightforward and Blambles can help manage it when the time comes — often within 3–7 years depending on the LVR and property growth.
If the borrower defaults, the lender will attempt to recover from the borrower's property first. If the sale of the property doesn't cover the full loan amount, the lender can then make a claim against the guarantor for the guaranteed amount. This is the real risk for the guarantor — which is why independent legal advice is required and why the guarantee should be limited in scope. Blambles structures the guarantee to minimise this risk and ensures the borrower's serviceability is genuinely solid before the arrangement proceeds.
Free consultation, no obligation. Blambles will walk you and your family through how a guarantor arrangement works — and whether it's right for your situation.