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Estimate how much equity a family member may need to pledge to support your home loan.
A guarantor home loan can allow first home buyers to enter the property market with a smaller cash deposit by using equity in a family member's home as additional security. This calculator gives you an indicative estimate of the guarantee that may be required and the costs you may avoid.
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Send us your details →A guarantor home loan is a home loan structure where a family member offers part of the equity in their property as additional security for the borrower. It's a common approach for first home buyers who haven't yet built up the full 20% deposit traditionally required to avoid Lenders Mortgage Insurance.
Rather than the family member providing cash, they offer their property's equity as security. The lender takes a limited interest over a specific portion of the guarantor's property, sufficient to cover the gap between the borrower's cash deposit and the equivalent of a 20% deposit. The borrower remains fully responsible for repayments — the guarantor's property is only at risk if the borrower defaults and the lender cannot recover the loan amount through the borrower's own property.
Most major Australian lenders offer some form of family guarantee or family pledge product. The specific structure, terminology and policy varies between lenders.
This tool uses a few standard calculations to produce indicative figures.
The guarantee typically covers the difference between your cash deposit and the equivalent of a 20% deposit. The calculator works out the loan amount as the property price minus your cash deposit, then identifies the gap to reach the 80% loan-to-value threshold:
Lenders Mortgage Insurance (LMI) is typically required when a borrower has less than a 20% deposit. The calculator uses publicly available industry premium ranges to estimate the LMI cost that the guarantee structure may help avoid. Actual LMI premiums vary by lender, loan amount, and individual circumstances.
If you select First Home Buyer, the calculator applies the NSW First Home Buyer concession: full exemption for properties up to $800,000 and a partial concession between $800,000 and $1,000,000. Above $1m, standard rates apply. For investment properties or non-FHB purchases, standard NSW residential rates are used.
The calculator does not predict an exact release date. Instead, it shows a typical range of 5–8 years, reflecting that release is generally possible once the loan reaches around 80% LVR and that timing depends heavily on repayment progress, property value movement and individual circumstances.
To illustrate how the inputs interact, consider a typical Sydney scenario.
Property purchase price: $1,200,000
Cash deposit: $60,000
Guarantor's property value: $1,500,000
Guarantor's outstanding mortgage: $400,000
In this scenario, the calculator estimates that around $180,000 of guarantee may be needed to reach the equivalent of a 20% deposit. This represents approximately 16% of the guarantor's property value. The buyer may avoid an estimated $32,000 in Lenders Mortgage Insurance.
These figures are indicative only.
Lenders assess each guarantor application individually. While policies vary, most lenders consider similar high-level factors when reviewing a guarantor home loan structure:
A guarantee involves both parties — the borrower and the family member offering security. It's worth taking time to think through the longer-term picture before proceeding.
Get in touch with The Kapital and we'll discuss the options available to you.
Get in touch →Releasing a guarantee removes the family member's property from the loan structure, leaving the borrower's loan secured only against their own home. Here's the general process most lenders follow:
This is generally the threshold at which the guarantee is no longer required. Both repayments reducing the loan balance and property value growth contribute toward reaching it.
The lender arranges an independent valuation of the borrower's property to confirm the loan-to-value ratio.
The borrower applies to the lender to release the guarantee. Updated income and serviceability documentation is generally required.
The lender confirms the borrower can service the loan independently of any guarantor support.
Once approved, the lender removes the guarantee from the family member's title.
A guarantor home loan isn't the only path for buyers without a 20% deposit. Depending on individual circumstances, the following alternatives may also be worth exploring:
A federal government scheme that supports eligible first home buyers to purchase with a smaller deposit, with the government acting as a guarantor for the deposit shortfall. Income and property price caps apply, and places are limited each financial year.
A shared equity scheme where the government takes a percentage stake in the property in exchange for reducing the buyer's required deposit and loan size. The government's share is typically bought back over time.
Standard home loans with deposits as low as 5% are available, with Lenders Mortgage Insurance applied. LMI can typically be capitalised onto the loan amount but increases overall borrowing costs.
A family member may simply gift part of the deposit without becoming a guarantor. Most lenders require a written confirmation that the funds are non-repayable, and may also require evidence of genuine savings.
For a deeper look at borrowing capacity, repayments and stamp duty across these scenarios, see our Borrowing Capacity Calculator, Mortgage Repayment Calculator and NSW Stamp Duty Calculator.
A guarantor home loan is a home loan structure where a family member offers part of the equity in their property as additional security for the borrower. This can allow the borrower to enter the property market with a smaller cash deposit and may help them avoid Lenders Mortgage Insurance (LMI). The guarantee covers the gap between the borrower's cash deposit and the equivalent of a 20% deposit.
Most lenders accept immediate family members as guarantors, most commonly parents. Some lenders also consider siblings, grandparents or other close family members, though policies vary. Guarantors generally need to own a property with sufficient equity, demonstrate stable financial circumstances and obtain independent legal advice before signing.
The guarantee typically covers the difference between the borrower's cash deposit and the equivalent of a 20% deposit. For example, on a $1.2M property with a $60,000 cash deposit, the equivalent of a 20% deposit is $240,000, leaving a gap of around $180,000 that the guarantee may need to cover. This is an indicative calculation only.
Usable equity is the portion of a guarantor's property value that lenders typically consider available as security. It is generally calculated as 80% of the property's value minus any outstanding mortgage. For example, a $1.5M home with a $400,000 mortgage has usable equity of around $800,000. Different lenders may apply different criteria.
A guarantee is typically released when the loan reaches around 80% loan-to-value ratio (LVR) on the borrower's property. Depending on repayment progress and property value changes, this is generally somewhere in the range of 5–8 years, though outcomes vary considerably based on individual circumstances and market conditions.
Yes. Alternatives include the First Home Guarantee scheme, the Help to Buy shared equity scheme, low-deposit loans where Lenders Mortgage Insurance is paid, or a gifted deposit from a family member. Each option has different eligibility criteria, costs and trade-offs. The right choice depends on individual circumstances.
Costs typically include the buyer's cash deposit, stamp duty (with possible First Home Buyer concessions in NSW), legal and conveyancing fees, building and pest inspections, and lender application or settlement fees. Independent legal advice for the guarantor is also generally required and carries its own cost.
Once a guarantee is in place, a guarantor cannot simply withdraw. Release generally requires the loan to reach a specific loan-to-value threshold (commonly 80%), or for the borrower to refinance, sell, or pay down the loan sufficiently. Independent legal advice is recommended before signing any guarantee agreement.
While a guarantee is active, it is generally recorded as a contingent liability on the guarantor's credit file. This may reduce their borrowing capacity if they wish to refinance their own home, take out new loans, or buy an additional property. Specific impact depends on the lender and the guarantor's overall financial position.
This calculator provides general estimates only and does not take into account your personal objectives, financial situation or needs. For tailored guidance, get in touch with The Kapital — we'll discuss your specific scenario and walk through the options available to you and your family.
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