Family Guarantor Loans: Helping Loved Ones into the Market

For many young Australians, getting into the property market feels just out of reach. Not because they can’t afford repayments, but because saving the deposit (plus stamp duty and other upfront costs) is a steep climb.

One option available is a Family Security Guarantee (also called a Family Pledge). Used carefully, this can help first home buyers get into the market sooner, without relying on cash gifts.

What is a Family Security Guarantee?

A Family Security Guarantee allows a family member, often a parent – to use the equity in their home as additional security for someone else’s home loan. This can allow the borrower to:

• Buy a home with little or no deposit
• Cover upfront costs like stamp duty and legal fees
• Avoid paying Lenders Mortgage Insurance (LMI), which can run into tens of thousands of dollars

A Quick Note on LMI:

Lenders Mortgage Insurance (LMI) protects the lender, not the borrower, if a loan isn’t repaid. It’s often charged when borrowing more than 80% of a property’s value, and can cost $10,000 to $30,000 or more. Avoiding LMI can be a major financial advantage for new buyers.

How the Guarantee Works:

• A family member uses part of their home equity (usually up to 50%) as limited security
• Their name doesn’t go on the loan or property title
• They don’t need to show income or make repayments; the support is equity-based
• If they have a mortgage, the combined borrowings (theirs + the guaranteed portion) usually can’t exceed 80% of their home’s value
• Independent legal advice is required for all guarantors to ensure everyone understands the risks

Important: If the borrower can’t meet repayments, the guarantor may need to cover the shortfall. In extreme cases, their own property could be at risk.

Who Might Use This?

Family Guarantees are typically available to:

• First home buyers
• Borrowers with stable income but low savings
• Investors in some cases (depending on lender rules)

It allows family members to help out without gifting large sums of money, and without dipping into their own retirement savings or cashflow. Clear Sky Finance’s Lending Specialist can explain how these structures work in practice and whether they’re suitable for your situation.

Already Own Your Own Home?

If you already own your own home but are struggling with repayments or juggling multiple debts, Clear Sky Finance (authorised under Australian Credit Licence 389087) can discuss options to help free up your cashflow.

Some strategies Clear Sky Finance may explore with you, include:

• Debt Consolidation: Combining credit cards, personal loans, or car finance into your mortgage can reduce your monthly repayments and simplify your finances, especially if your home has risen in value, and you’ve built up equity.
• Equity Release: Want to renovate, invest, or help your kids? You may be able to use equity in your property to access funds without selling. This can be structured carefully to avoid overextending or affecting your long-term plans.

Next Steps:

Clear Sky Financial provides financial advice. Where lending products are concerned, we work alongside our credit partner:

👉 Clear Sky Finance, our lending division, operates under Australian Finance Group Ltd (ACL 389087).

If you’d like to explore family guarantees, debt consolidation, or equity release, Clear Sky Finance can walk you through the options, explain the pros and cons, and help structure lending in line with your overall financial goals.

Book a free Discovery Call with Sanna Tammila, Clear Sky Finance’s Lending Specialist, here.
Or call us on 1300 640 899.

Important Information:

Clear Sky Financial Pty Ltd (ABN 36 634 263 148) is a Corporate Authorised Representative No.1299668 of InterPrac Financial Planning Pty Ltd (Australian Financial Services Licence Number 246638). Clear Sky Finance Pty Ltd (ACN 679 620 716) is authorised under Australian Finance Group Ltd ACN 066 385 822, Australian Credit Licence 389087.

The information in this document is true and correct at the time of publication. It is general in nature and does not take into account your objectives, financial situation or needs. Before acting on this information, consider whether it is appropriate to you, and seek personalised advice where required.