Guarantor home loans in Melbourne explained
Saving a deposit is the hardest part of buying in Melbourne. A guarantor home loan lets a family member use their property as security so you can buy sooner — often with no deposit and no lenders mortgage insurance.
What a guarantor loan is
With a guarantor loan, usually a parent offers part of the equity in their own home as additional security for your loan. This reduces the deposit you need — sometimes to zero.
Because the bank has extra security, you can often avoid lenders mortgage insurance, which can save tens of thousands of dollars.
How it helps you buy sooner
Instead of waiting years to save a 20% deposit while Melbourne prices climb, a guarantor lets you enter the market now with the guarantee covering the shortfall.
Many first home buyers use a guarantor to buy earlier, then refinance to release the guarantee once they've built enough equity.
The risk for the guarantor
A guarantor is legally responsible for the guaranteed portion if you can't repay. That's a serious commitment, so guarantors should get their own legal advice before signing.
The good news is the guarantee is usually limited to a specific amount, not your whole loan, and can be released later.
Releasing the guarantee
Once your property grows in value or you pay down your loan enough that you owe under 80% of the value, you can usually refinance to remove the guarantee.
This frees your guarantor from any obligation — a milestone most families aim for within a few years.
Is a guarantor loan right for your family?
Guarantor loans suit buyers with strong income but a small deposit, and family who are willing and financially able to help. They're not right for everyone.
A XLOANS broker will explain the structure, the safeguards and the exit plan so both you and your guarantor go in with eyes open.
Keep reading
Frequently asked questions
This page is general information only and not financial advice. Lending criteria, rates and government schemes change — speak to a XLOANS broker for advice tailored to your situation. XLOANS is a Melbourne-based mortgage broking service.
Thinking about a guarantor loan?
A XLOANS broker will walk you and your family through the structure and safeguards — free, in a quick chat.