Using a Parent’s Property as a Security Guarantee:
What First Home Buyers Need to Know
Buying your first home can feel like a massive leap, especially when saving a big enough deposit is holding you back. But what if your family could help fast-track the process without gifting cash?
Welcome to the world of security guarantor loans, a strategy where a parent (or close family member) offers their property as additional security for your home loan.
🔍 What Is a Security Guarantee?
A security guarantee is when a family member (usually a parent) uses the equity in their own property to help secure your loan. This doesn’t mean they’re giving you money. Instead, they’re offering the lender extra reassurance by putting part of their home up as collateral, so you can borrow more, sooner, and possibly avoid Lender’s Mortgage Insurance (LMI).
👨👩👧👦 Who Can Be a Guarantor?
Typically, guarantors are:
Parents or step-parents
Occasionally siblings or grandparents (depending on the lender)
They must own property in Australia, usually with solid equity and a good credit history
✅ Benefits for First Home Buyers
Using a guarantor can be a powerful move. Here’s how it helps:
Buy sooner: You won’t need to wait until you’ve saved a 20% deposit
Avoid LMI: Save thousands in insurance costs charged on high-LVR loans
Boost borrowing power: Lenders may approve a higher loan amount
Keep your savings: More funds available for moving, furniture, or renovations
⚠️ Risks and Responsibilities
While this setup can be a game-changer, it’s important to understand the risks:
Guarantors are liable: If you can’t repay your loan, the lender can pursue the guarantor for the guaranteed portion
Limited guarantee is possible: In most cases, the guarantee is only for a portion of the loan (often 20%), not the full amount
Impact on guarantor’s borrowing: Their ability to borrow in the future might be affected while the guarantee is active
🔓 When Can the Guarantee Be Removed?
Once you’ve built up enough equity in your home (usually by paying down your loan or property value increasing), you may be able to:
Refinance the loan and release the guarantor
Request the lender to reassess and remove the guarantee (subject to conditions)
🛠 How We Can Help
At Mesh Finance, we’ll guide you through the entire guarantor loan process, from assessing whether it’s the right fit, to working with the lender, and helping your parents understand their commitment.
We’ll also:
Compare lenders that offer family guarantee loans
Ensure the guarantor only covers the minimum amount necessary
Support both buyer and guarantor with clear communication and legal advice referrals
📞 Ready to explore a family guarantee loan?
Get in touch for a no-obligation chat. We’ll help you unlock the door to homeownership, sooner than you think.
