For many young Australians, getting into the property market feels just out of reach – not because they can’t service a loan, but because saving the deposit (plus stamp duty and other costs) is a steep climb.
But there are smart ways to break in sooner, and Family Guarantor Loans are one of the most powerful tools available. If you’ve built up equity in your home, this could be a way to help your kids or loved ones take that first step – without handing over cash.
What is a Family Security Guarantee?
A Family Security Guarantee (sometimes called a Family Pledge) allows a family member – like a parent, sibling, or adult child – to use the equity in their own 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 the costs of buying (like stamp duty and legal fees)
- Avoid paying Lenders Mortgage Insurance (LMI)
Wait – What is LMI?
Lenders Mortgage Insurance (LMI) is a one-off premium usually charged when you borrow more than 80% of a property’s value. It protects the lender (the bank) – not the borrower (you) – if you can’t repay your loan.
And it’s not cheap. Depending on the loan amount, LMI can cost $10,000 to $30,000 or more, and it’s often rolled into your loan (meaning you pay interest on it too).
Avoiding LMI is one of the biggest financial wins for new buyers, and family guarantees are one of the only ways to do it without a massive deposit.
How the Family Guarantee Works:
- Your family member uses a portion of their home equity (up to 50%) as a limited guarantee
- Their name doesn’t go on the loan or property title
- They don’t need to show income or repay anything – it’s purely equity-based
- If they still have a mortgage, the total borrowing (theirs + your guaranteed amount) usually can’t exceed 80% of their property’s value
- They’ll need to get independent legal advice before proceeding, to make sure everyone understands the commitment
While family guarantees can be incredibly helpful, they’re not risk-free. If the borrower can’t meet their loan repayments, the guarantor may be required to cover the shortfall – and in extreme cases, their own property could be at risk. That’s why lenders require all guarantors to seek independent legal advice before proceeding.
Our Finance Specialist can take you through the pros and cons if it’s something you want to explore.
Who’s Eligible?
This structure is typically available to:
- First home buyers
- Investors (in some cases – as long as they don’t own other properties)
- Those with stable income but limited savings
It’s ideal for families who want to help without gifting large sums of money, and without dipping into their own retirement savings or cashflow.
What If You Already Own a Home?
If you’re already in the market but struggling with repayments or juggling multiple debts, there may be other options to free up your cashflow.
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.
Final Thoughts:
Whether you’re helping your kids buy their first home or restructuring your own finances to reduce stress, understanding your options makes all the difference.
Clear Sky Financial can walk you through the pros and cons of family guarantees, equity strategies, and loan structuring – so you can make informed decisions that work for your whole family.
Need help crunching the numbers – or just want to see what’s possible?
Clear Sky’s brand-new Loan Calculator makes it easy to get a quick estimate of your repayments and explore different loan scenarios. But calculators only tell part of the story. For tailored advice that takes your full financial picture into account, we invite you to book a free Discovery Call with our Lending Specialist, Sanna Tammila. Whether you’re supporting a first-home buyer, looking to restructure your own finances, or exploring ways to put your equity to work – Sanna can walk you through your options, answer your questions, and help connect the numbers to your lifestyle goals.
👉 Book your no-obligation Discovery Call here.
Or call us on 1300 640 899.
Clarity starts with a conversation, and we’re always happy to help – even if it’s just to confirm you’re on the right track.
Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.
