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How a First Home Buyer Got In With No Deposit Using a Family Guarantor

Find out how we helped a young professional buy his first home without a full deposit and without paying LMI, with the support of a family guarantor.

A quick overview

LOAN AMOUNT

$ 0

SECURITY VALUE

$ 0

LVR

0 %

INTEREST RATE

0 % p.a.

PURPOSE

Owner-occupied home purchase

Client details changed for privacy. Outcome based on lender policy at settlement.

Disclaimer:

Client names and identifying details have been changed to protect privacy and confidentiality. The following case study shows how the right mortgage guidance can help a first-home buyer enter the market with family support.

Note:

Lending policies and eligibility criteria can change over time. The outcome described here was based on the lender policies available at the time of settlement and may not reflect current conditions. A guarantor arrangement is a significant commitment, and guarantors should seek independent legal and financial advice.

The Challenge

Jacob was a young professional with a secure job and a good income. He was tired of renting and watching property prices climb, and he was keen to buy his first home before they moved further out of reach.

The issue was the deposit. Jacob had been saving steadily, but between rent and the rising cost of living, he had not yet built up a full deposit. He had enough to contribute towards costs, but not the 20% that would let him avoid Lenders Mortgage Insurance, and saving that amount would take him several more years.

His parents wanted to help, but they did not have a large sum of cash to give him either. What they did have was a home they owned with plenty of equity, and a willingness to support him if it could be done safely.

Finding the Right Solution

After reviewing Jacob’s income and his parents’ position, our broker explained how a guarantor home loan could work. Rather than gifting cash, his parents could offer a limited guarantee, secured against part of the equity in their own home.

This extra security meant the lender could approve a loan covering the full purchase price plus costs, without Jacob needing a 20% deposit and without charging Lenders Mortgage Insurance. Importantly, we structured it as a limited guarantee, which capped his parents’ exposure to a set amount rather than the entire loan.

We also explained the exit plan. As Jacob paid down the loan and his property grew in value, the guarantee could later be released, so his parents would not be tied to the arrangement indefinitely. We encouraged his parents to obtain their own independent legal advice before proceeding, so everyone understood the commitment.

The Application Process

We prepared the application with both properties in mind, presenting Jacob’s income and the limited guarantee clearly so the lender could see a well-secured, serviceable loan.

Because guarantor loans involve an extra party, we made sure the documentation for both Jacob and his parents was complete and that the guarantee was correctly structured and limited from the outset.

With everything in order, the lender issued formal approval, and Jacob was able to move towards settlement on his first home.

Struggling to Save a Full Deposit?

If you have a stable income but the deposit is the only thing holding you back, a guarantor could help you buy sooner and skip Lenders Mortgage Insurance. With a properly structured, limited guarantee, family support does not have to mean family risk. Our team can explain how it works and check whether it suits your situation.

The Outcome

Jacob purchased his first home, valued at $650,000, with a loan of $663,000 covering the purchase and costs at 6.09% p.a., supported by a limited family guarantee and with no LMI to pay.

Instead of spending several more years renting while trying to save a full deposit, he was able to get into the market straight away. His parents’ commitment was capped and clearly defined, with a path to release the guarantee down the track.

Today, Jacob is building equity in his own home and working towards the point where the guarantee can be removed entirely.

Solution:

Strong income and secure job, but not enough saved for a full deposit, with prices rising.

Key Takeaway:

Used a family guarantor so the loan covered the purchase and costs, with no deposit needed and no LMI.

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Frequently Asked Questions

1. What is a guarantor home loan?

It is a loan where a family member, usually a parent, offers part of the equity in their own property as additional security for your loan. This extra security can let you borrow the full purchase price and costs, often with little or no deposit, and avoid Lenders Mortgage Insurance.

2. Does the guarantor have to give me money?

3. Who can be a guarantor?

4. Can the guarantee be removed later?

5. How much can the guarantor be liable for?

6. What are the risks for the guarantor?