If you’ve got a stable income but can’t get your deposit past 10-15%, a family guarantee home loan is one of the few options that can genuinely move your timeline forward. It’s also one of the most misunderstood products in lending. “Guarantor” gets used loosely for a few different arrangements, and Perth borrowers researching a guarantor home loan often find the terms used interchangeably online.
Here’s the short version: a family guarantee home loan lets a parent or close family member use the equity in their own property as extra security for your loan. They’re not handing over cash. They’re not co-borrowing. They’re putting a defined portion of their property on the line so you can borrow more, avoid Lenders Mortgage Insurance (LMI), or both.
It’s a big ask of the person offering the guarantee, and a good broker will make sure both sides understand exactly what they’re signing up for before anything gets submitted to a lender. That’s what this guide covers, in plain terms.
What Is a Family Guarantee Home Loan?
A family guarantee home loan (also called a family pledge, guarantor home loan, family guarantor home loan, or limited guarantee) uses a family member’s property equity as additional security for the loan. It replaces the need for the borrower to provide a full 20% cash deposit.
The guarantor doesn’t gift or transfer money. Instead, the lender takes a limited guarantee over an agreed portion of the guarantor’s property, usually enough to bring the borrower’s effective deposit up to 20% of the purchase price. It’s released once the borrower’s loan-to-value ratio (LVR), the loan amount as a percentage of the property’s value drops below 80%, through repayments, value growth, or both. Most lenders that offer this product call it a “family pledge” or “family guarantee,” and the mechanics are broadly similar across the major banks, though eligibility and release conditions vary lender to lender, exactly the kind of variation a broker comparing options across more than 30 lenders can help you work through, rather than relying on one bank’s version of the product.
This is different from the Australian Government’s Family Home Guarantee, a separate scheme aimed at eligible single parents buying with a 2% deposit and no guarantor at all. If you’ve seen that term elsewhere, it’s not what we’re covering here, we’ll touch on it briefly further down.
How the Guarantee Works
A family guarantee arrangement generally follows the same steps at most lenders:
- The borrower applies for the loan with their usual income, expenses and credit history assessed as normal.
- The guarantor offers a limited guarantee over part of their property, secured by a second mortgage registered against that property (not the borrower’s).
- The lender calculates the combined security – the borrower’s new property plus the guaranteed portion of the guarantor’s equity, to bring the LVR to 80% or below, which can remove the need for LMI.
- Both parties sign separately, each with their own solicitor, because a lender won’t proceed without proof that guarantor and borrower each received independent legal and financial advice.
- The guarantee stays in place until the borrower’s LVR falls below 80%, at which point either party can apply to release it, subject to a new valuation.
The guarantor’s own home loan (if they have one) isn’t affected day to day, but the guarantee is recorded against their title. That matters for the next section.
A Worked Example (Illustrative Only)
Say a Perth first home buyer is looking at a $650,000 purchase with a $65,000 deposit saved (10%). A full 20% deposit on that purchase would be $130,000, so there’s a $65,000 gap. Instead of spending another few years saving or paying LMI on the shortfall, a parent could offer a limited guarantee over approximately $65,000 of equity in their own property, bringing the combined security to the equivalent of an 80% LVR.
This example is illustrative only. The actual guarantee amount a lender will accept depends on the property valuation, the lender’s specific policy, and how much of the gap the guarantor is willing and able to cover, a broker can model the real numbers for your situation. For what LMI itself might cost if a guarantor isn’t part of the picture, our Lenders Mortgage Insurance guide breaks down current premium estimates by deposit size.
Who Can Be a Guarantor?
Lenders typically want the guarantor to be an immediate family member, most often a parent, though some lenders extend this to siblings or grandparents. Beyond the relationship test, the guarantor generally needs to:
- Own a property with enough equity to cover the guaranteed portion
- Be assessed as financially capable of meeting the guarantee if called on
- Get independent legal advice confirming they understand the obligation
- Not already be carrying other guarantees that would stretch their own position
Every lender applies its own version of these criteria, and approval isn’t guaranteed just because a family member is willing. If you’re weighing this up, whether you’re eyeing something in the established western suburbs or a first home further out in Baldivis or Ellenbrook, it’s worth talking it through with a broker before you approach a lender directly.
The Risks for Guarantors
This is the part that gets glossed over in a lot of the marketing around family guarantee loans, so it’s worth being direct about it.
- The guarantor’s property is at risk. If the borrower defaults and the lender has to call on the guarantee, the guarantor’s home could be sold to cover the shortfall.
- It can affect the guarantor’s own borrowing capacity. While the guarantee is active, some lenders factor it into the guarantor’s serviceability if they want to borrow for something else.
- Release isn’t automatic or fast. It depends on the borrower’s LVR reaching 80%, a fresh valuation, and the lender’s sign-off, none of which the borrower can force on a set timeline.
- Family relationships carry the strain, not just the finances. If repayments slip, the conversation lands on both sides of the family, not just the lender’s collections team.
Because of all this, both the guarantor and the borrower must get independent legal and financial advice before signing anything. This isn’t optional paperwork – it’s a standard requirement most lenders won’t lend without, and it exists precisely because the risks above are real. ASIC’s MoneySmart has a breakdown of guarantor risk that’s worth reading before either party signs.
How to Release the Guarantee
The guarantee is typically released once the borrower’s LVR falls below 80% of the property’s current value. In practice, that happens one of two ways:
- Through repayments, as the loan balance shrinks relative to the purchase price.
- Through value growth, if the property has appreciated enough that the same loan balance now represents a smaller share of its worth.
Once the borrower believes they’ve hit that threshold, they (or their broker) request a new valuation and apply to the lender to have the guarantee removed. This can happen sooner than a standard 20%, deposit timeline in a rising market, but it’s never guaranteed on a fixed date. The lender makes the final call based on the valuation it accepts.
Family Guarantee vs Other Low-Deposit Options
A family guarantee mortgage isn’t the only way to get into the Perth market without a full 20% deposit. It suits a different situation to the alternatives below, none of these is simply “better,” they solve different problems.
| Option | How it works | Best suited to |
| Family guarantee mortgage | Family member’s equity used as extra security | Borrowers with willing family support and no other low-deposit eligibility |
| 5% Deposit Scheme | Government guarantee to the lender, no family involvement, property price cap applies (no income cap since the October 2025 expansion) | Eligible first home buyers under the Perth property price cap |
| Standard loan with LMI | Borrower pays an insurance premium instead of using extra security | Borrowers without a guarantor who don’t meet scheme eligibility |
| Keystart (WA Government-backed lender) | Lower deposit lending for eligible WA buyers, subject to its own criteria | Buyers who meet Keystart’s specific eligibility settings |
If you’re weighing this up against Perth’s first home buyer grants and schemes, it’s worth having a broker map out which combination actually applies to your situation – some of these can be used together, some can’t.
Frequently Asked Questions
Is a family guarantee home loan the same as the government’s Family Home Guarantee?
No. A family guarantee (or family pledge) is a private arrangement between a borrower and their bank, where a family member’s property equity is used as security. The government’s Family Home Guarantee is a separate scheme for eligible single parents, where the government – not a family member – guarantees part of the loan.
Does the guarantor need to pay anything upfront?
The guarantor doesn’t pay anything upfront. They’re not providing cash and don’t make repayments unless the borrower defaults and the lender calls on the guarantee – their contribution is the equity in their property, offered as security.
Can a family guarantee help me avoid Lenders Mortgage Insurance?
A family guarantee can help you avoid LMI in many cases, because the guarantor’s equity can bring the combined security to 80% LVR or below. Whether this works for your situation depends on the property value, loan amount and the lender’s specific policy.
How long does a family guarantee usually stay in place?
There’s no fixed timeline. It depends on how quickly the borrower’s LVR falls below 80% through repayments or value growth, and on the lender approving a new valuation. Some borrowers see release within a few years; others take longer, depending on the market and their repayment pace.
What happens if the borrower can’t make repayments?
The lender can call on the guarantee, which may mean the guarantor’s property is used to cover the shortfall. This is exactly why independent legal and financial advice for both parties is a lender requirement, not a suggestion.
Can I get a family guarantee loan through Strategic Mortgages Perth?
We can talk you through whether a family guarantee suits your situation, compare it against other low-deposit options, and coordinate with your solicitor and your guarantor’s solicitor as the application moves forward. Whether it’s the right fit depends on your circumstances and the guarantor’s.
Thinking About a Family Guarantee Loan in Perth?
A family guarantee can help you buy sooner, but it’s a decision that affects two households, not one. Talk to Strategic Mortgages Perth – we’ll walk through the full picture for both borrower and guarantor before you commit to anything.
Book a free, no-obligation chat with Strategic Mortgages Perth
Disclaimer: The information provided in this article is general in nature and does not constitute financial, tax, or legal advice. Individual circumstances vary. We recommend consulting with qualified professionals before making financial decisions.
