Guarantor home loans
How the guarantee works, and how to get it released.
Guarantor Loan Calculator
How large a guarantee is needed to get you to 80%, whether your guarantor has the equity to provide it, and what mortgage insurance it saves you.
Is that number right for your situation?
A calculator applies one formula. Lenders apply their own, and they disagree with each other. Send us what you worked out and we will tell you how it looks against real lender policy.
- More than 60 lenders compared
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- A real answer, not a sales call
How the guarantee amount is worked out
The guarantee needs to be large enough that the lender holds security worth at least 125% of your loan, which is another way of saying your loan sits at 80% of combined security. We calculate the shortfall between your property value and that requirement, and that shortfall is the limited guarantee.
The guarantor is exposed only to that amount, not to your whole loan. This is the single most misunderstood part of guarantor lending, and it is worth being clear about before you ask a family member.
What it saves and what it risks
The saving is mortgage insurance, plus the years you would otherwise spend saving a larger deposit. The risk sits entirely with the guarantor: if you default and the property sells for less than the debt, they are liable up to the guaranteed amount.
That risk falls as you repay and as your property appreciates, and it ends when the guarantee is released, usually once your loan is below 80% of your property value on its own. Read the full explanation, including how release works, on our guarantor home loans page.
Before you ask your parents
A guarantee affects the guarantor's own borrowing while it is in place, because lenders treat it as a contingent liability. If they are planning to downsize, renovate or borrow themselves, that needs to be part of the conversation now rather than later.
Every guarantor must also obtain independent legal advice. Lenders require it and it exists to protect them, not the bank. Treat it as essential rather than a formality. We are happy to explain the structure to your parents directly before anyone signs anything.
Common questions
No. No funds change hands. They provide a limited guarantee secured against their property, and the lender counts it as additional security.
The calculator tells you the shortfall. Options include a smaller purchase, a larger deposit from you, a second guarantor where the lender permits it, or paying LMI on a low deposit loan instead.
Yes, usually once your loan falls below 80% of your property value without it. You apply, the lender revalues, and it is released. It is not automatic, so it is worth reviewing every year or two.
Some lenders allow it, though most prefer a parent, and the further from an immediate parent you go the fewer lenders will consider it. It is one of the clearer reasons to compare across a panel.
Thinking about asking family?
We will explain the structure and the risks to your parents directly, before anyone commits.
Related
Low deposit home loans
Buying with a small deposit without involving family.
LMI calculator
What mortgage insurance costs if you go without a guarantee.