First Home Buyers · October 2026 · 6 min read
Instead of saving the full deposit, a family member offers equity in their own property as security. Here is how it works, who can do it, and the risk to say out loud before anyone signs.
Photo: Matt Stone, CC BY-SA 4.0 via Wikimedia Commons
The deposit is the wall most first home buyers hit. Not the repayments, which they often already prove they can handle by paying rent. The lump sum.
A guarantor loan is one of the few legitimate ways around it. Instead of you saving the full deposit, a family member offers equity in their own property as extra security for your loan.
Say you want to buy at $600,000 and you have $30,000 saved. That is 5 percent, and most lenders want mortgage insurance or a bigger deposit at that level. If your parents own their home, the lender can take a limited guarantee over part of its value, enough to cover the gap.
You borrow the full purchase price against your new home. Your parents' property backs only the guaranteed slice, commonly the top 20 percent or so, not your whole loan. You make every repayment. Their house only enters the picture if everything goes wrong.
Who carries what
Usually parents, sometimes another close family member. They need enough equity in their property, their own finances in reasonable shape, and a lender willing to take the guarantee. Retirees on a pension can struggle to be accepted, even with plenty of equity.
The guarantor is assessed almost like a borrower. The lender wants to know they could survive if the guarantee was ever called on.
If you default and the sale of your home does not cover the debt, the guarantor owes the guaranteed amount. In the worst version of that story, their home is sold to cover it. That is rare, and it is real.
While the guarantee is in place, it also sits on their credit file as a liability. If your parents want to borrow for themselves, refinance, or help a sibling the same way, the guarantee can reduce what they are able to do.
A guarantee is not a gift of money. It is a gift of borrowing power, with a house attached.
The guarantee is not forever. Once your loan balance drops enough, or your home's value rises enough, that you owe less than 80 percent of the value, you can ask the lender to release it. Sometimes that takes two or three years of repayments. Sometimes one strong market does it faster.
Mark it on a calendar. Nobody at the bank rings to suggest removing a guarantee.
If the deposit is the only thing between you and a purchase, it is also worth checking the government schemes first, because some let eligible buyers in with a 5 percent deposit and no mortgage insurance, without involving your parents at all. Our grants guide covers what is on offer, and the deposit guide works through the deposit question properly.
Is a guarantee on the table in your family, or are you being asked to be one? Book a call and we can walk both sides through the numbers before anyone commits.
The information in this article is general in nature and does not take into account your personal circumstances. Speak with a qualified mortgage broker before making lending decisions.
