If you’re a first-home buyer, you may have heard the term “guarantor” used in relation to home loans. But what exactly is a guarantor? In short, a guarantor agrees to cover the repayments on your home loan if you cannot make them.

This can be a family member or friend with sufficient equity in their own property or other assets. Having a guarantor can help you secure a home loan when you otherwise might not be able to – but it’s important to understand the benefits and risks involved before entering an agreement. This article looks deeper into obtaining a guarantor’s assistance when securing your home loan.


A guarantor on your home loan is someone who agrees to cover the repayments if you can’t.

Taking the first step into homeownership can be an incredibly empowering experience. However, it comes with the burden of managing a sizable mortgage loan. Most lenders will require a 20% deposit on the value of the property you would like to purchase. If you don’t have a 20% deposit, you may consider finding someone suitable to act as a guarantor on your home loan to help you secure your purchase.

A guarantor is a person who agrees to pay out the mortgage if you’re unable to do so – they will usually be close friends or family members such as parents, who trust that you’ll take every measure necessary to keep up with payments. It presents an attractive option for first-home buyers looking to enter the market, but not all lenders will accept guarantors, and using a guarantor should be something that is considered in context to your personal circumstances.

We recommend you speak to your broker to further explore if a guarantor would be the right move for your circumstances.


A guarantor is usually a family member or close friend with good credit and income.

A suitable guarantor is usually a person with good credit and income that can help someone else qualify for a loan or line of credit, provided the guarantor agrees to cover any amounts owed should the borrower default.

Guarantors must understand and accept the obligation they are taking on, as they could be left responsible for significant debt if the borrower defaults. Before agreeing to serve as a guarantor, it is strongly recommended that guarantors have full discussions with the borrower to thoroughly understand their role and its potential consequences.


The guarantor will be on the contract with the lender.

If you are obtaining the assistance of a guarantor to ensure repayment, this third party is legally responsible for the terms of the loan, should the borrower fail to comply with their duties.

This means that the guarantor enters a legally-binding agreement with your lender, outlining their commitment and understanding of the responsibility placed upon them. Both parties must review and discuss any specifics before signing the contract, ensuring that both understand all obligations and consequences associated with the contract.

Knowing the details and remedies helps to mitigate potential issues in fulfilling these responsibilities.


If you default on your loan, the guarantor will be responsible for making the payments.

Defaulting on a loan can have serious consequences, not only for the person who took out the loan, but also for anyone who has signed as a guarantor of the loan. By becoming a guarantor, you have agreed to assume some of the risk associated with the loan.

As such, it’s important to carefully consider being a guarantor and understand that it’s not a casual commitment; if you agree to stand behind someone’s loan agreement and they default on their payments, you will be obligated to make sure those payments are fulfilled.


This arrangement can help you get a home loan when you otherwise wouldn’t be able to.

Guarantors are often used to assist first-home buyers in gaining access to home loans if they don’t have the deposit or equity required by their lender. Because the guarantor agrees to pay the loan if the primary borrower cannot do so, the guarantors asset security and ability to service the loan are also assessed when establishing loan eligibility.

By agreeing to be a guarantor on a loan, the guarantor will not receive any money or benefit directly from it; they are typically not on the title or assume any ownership of the property but will become responsible for the debt. Because the guarantor assumes a great deal of risk without any potential reward, it is important to remember that taking on such responsibility is serious and should not be entered into lightly.


It’s important to make sure that you can afford the repayments before taking out a loan with a guarantor.

Making sure you can afford the loan repayments before signing up for a guarantor loan is an essential step to securing your financial position. Not only does the ability to service your loan provide security for the guarantor, but also it ensures that you are not taking on too much of a financial burden.

Additionally, if your income and expenditure don’t align with the loan repayments, you could miss payments and impact your credit score. Take time to plan and assess upfront whether taking out a guarantor loan is a feasible option for your circumstances, both in the short-term and long-term.

A guarantor on your home loan has been successfully used to help purchasers secure the finance for their property. To understand loan options to suite your circumstances, book in a chat with our team.



Terms are subject to approved persons only. This information is true and correct as of 7/01/2023.  All of the content above is general in nature and may not suit your personal needs, situation objective & goals.