Guarantor Home Loan Requirements and Risks

A guarantor home loan uses a family member’s property as extra security, so your client can buy with little or no deposit and often without lenders mortgage insurance (LMI). The guarantor is usually a parent who owns property with enough equity. They need independent legal advice before they sign.

The guarantee adds security to the loan, and the income test stays the same. Your client still has to service the whole loan from their own income, so a guarantor lowers the deposit and LMI but leaves borrowing power where it was.

People and Property

An eligible guarantor is a close family member who owns property the lender accepts, and who agrees to a guarantee limited to a set amount. Each lender sets its own list of relatives and its own limit. The table compares two banks’ family guarantees with Helia’s Family Pledge, an LMI product that lenders insuring with Helia can use.

Rule	Westpac Family Security Guarantee	CBA Family Security Support	Helia Family Pledge
Who can be a guarantor	Parents, a legal guardian, siblings or a child over 18	Family members, such as a parent or legal guardian, adult child, sibling or grandparent	A parent, child or sibling
Accepted security	Equity in the guarantor’s home, or cash in a Westpac term deposit	The guarantor’s own property	A first or second mortgage over residential property
Guarantee limit	No more than 50% of the guarantor’s security	The whole loan or a smaller amount	A set amount, with the pledge at no more than 50% of the guarantor’s property value

The rules come from Westpac’s Family Security Guarantee page as at October 2026 and CBA’s July 2025 guarantor guide. Helia’s rules are in its 10 August 2026 underwriting guidelines. None of the three accepts a friend as guarantor, and Helia excludes company and trustee guarantors.

Title, Mortgage and Relationship Checks

Start with the title of the guarantor’s property. Helia requires every registered owner of the pledged property to sign as a guarantor. A parent who owns the home with a partner can’t give the guarantee alone.

A guarantor can still have a mortgage on their own home. Under Helia’s guidelines, total debt on the guarantor’s property, including the pledge, can’t exceed 70% of its value. A parent whose $900,000 home has $200,000 owing could pledge up to $430,000, and Helia asks for six months of statements on the existing loan.

Then confirm the relationship against the lender’s list. A grandparent appears in CBA’s examples but not on Westpac’s or Helia’s lists. CBA handles spouses separately, through its Spousal Security Support.

Other lenders set their own lists. Ask Bulma’s Policy Advisor which lenders accept a grandparent as guarantor, and it checks the policies of 52+ lenders. Each answer quotes the policy wording, which you can keep in your file notes.

The guarantor’s own finances count too. Westpac’s page says a guarantor must be able to afford the potential repayments. Helia tests whether guarantors could service the guaranteed loan if the borrowers stopped paying, and looks at other equity where they can’t.

When a Guarantee Replaces the Deposit

A limited family guarantee can replace the cash deposit when it brings the loan within the lender’s loan-to-value ratio (LVR) limits. Westpac lends up to 100% of the purchase price, plus costs such as stamp duty and legal fees. Helia’s Family Pledge funds the full price plus 10% for costs, with no deposit, up to a $750,000 loan.

That makes it a conditional structure. Without the guarantor’s security, the same application would need a deposit. Your client still needs an eligible guarantor, a loan their own income can service and cash for anything the loan doesn’t cover.

Transaction costs still apply. Stamp duty, legal fees and lender charges fall due at settlement unless the lender adds them to the loan. The contract deposit is often due when contracts are exchanged, before any loan money arrives.

Genuine savings rules depend on the lender and the insurer. Helia’s standard LMI asks lenders to confirm 5% in non-borrowed funds above a 90% base LVR, while its Family Pledge requires no deposit or equity. When the guarantee takes LMI off the loan, the lender’s own genuine savings policy decides what your client must show.

Does a Guarantor Increase Borrowing Power?

No, a guarantor doesn’t increase borrowing power. CBA’s guide says that when a guarantor gives security support only, it assesses the application on the borrower’s financial information. The guarantee reduces the deposit and LMI, and serviceability still rests on your client’s income.

If your client’s income supports a $700,000 loan, a guarantee can’t stretch it to $745,000. The guarantor’s equity can only fill the gap between your client’s savings and the lender’s LVR limit.

Structure the Guarantee

Structure the guarantee as limited security support. The guarantor’s property secures a set part of the loan, and the guarantor’s income plays no part in servicing.

Income support is a different arrangement, where another person’s income counts toward servicing. CBA’s July 2025 guide limits personal borrowers to security support and offers servicing support only to company and trust borrowers. When a parent’s income is needed, the arrangement becomes joint borrowing, which the shared mortgage with parents guide explains.

Worked Example

In this fictional example, your client is buying a $750,000 home to live in, and the lender’s valuation matches the price. Your client has $40,000 in savings and assumed purchase costs of $35,000. Their parents own a $900,000 home with $200,000 owing.

Item	Structure A: your client pays the costs	Structure B: the loan covers the costs
Borrower contribution	$40,000, made up of $35,000 in costs and $5,000 toward the price	Nothing at settlement
Base loan	$745,000	$785,000
LVR on the purchased home alone	99.3%	104.7%
Guarantee limited to the loan above 80% of the home’s value	$145,000	$185,000
Guarantee under Westpac’s LVR formula	$182,000, for an LVR of 79.9%	$232,000, for an LVR of 79.9%
Cash needed at settlement	$40,000	Any cost the lender won’t add to the loan

The split row follows the example in CBA’s guide, where the guaranteed loan sits above 80% of the purchased home’s value. Westpac’s formula, as at October 2026, divides the loan by the property value plus the guarantee amount. For the same loan, that method needs a larger guarantee.

Both structures fit the parents’ home under Westpac’s 50% limit and the 70% debt limit in Helia’s 10 August 2026 guidelines. Structure A’s $745,000 loan also fits within the Family Pledge’s $750,000 maximum. Structure B’s $785,000 loan doesn’t.

In both structures, a 10% contract deposit of $75,000 would be more than your client’s $40,000. A deposit bond can cover that gap until settlement. The minimum deposit guide shows how to build the full funds-to-complete figure.

Risks for the Guarantor

The guarantor can lose their home. Moneysmart’s guide to going guarantor, updated 9 September 2026, warns that the lender can sell the guarantor’s property if the borrower defaults and the guarantor can’t pay.

CBA’s guide shows how that happens. Its fictional borrowers sold their home in a market downturn and still owed $47,000, and their guarantor became responsible for the shortfall. CBA says it recovers from the borrower’s property first, unless a substantial amount would still be owing.

A guarantor can be asked for the full guaranteed amount plus interest and reasonable enforcement costs. The guarantee can also reduce their own borrowing capacity. After a default, it can affect their credit report.

Evidence and Advice

Before accepting the guarantee, the lender verifies the guarantor’s identity, gives them the loan documents and confirms they’ve had a chance to get independent advice. The 2025 Banking Code of Practice sets most of this order for banks that subscribe to it. CBA’s July 2025 guide follows the same steps.

1. Verify identity. CBA asks the guarantor to sign preliminary forms that verify their identity and accept its privacy policy.
2. Collect the guarantor’s application and value the security. Helia’s 10 August 2026 guidelines require a full application with financial information, the security property’s details and any debt against it. The lender needs a valuation of that property, because Westpac’s formula and Helia’s limits both use its value.
3. Disclose the loan. Under paragraph 105 of the Code, the bank gives the guarantor the proposed loan contract, a list of any related security contracts and any credit report on the borrower. It also supplies financial statements the borrower gave it in the previous two years.
4. Meet the guarantor alone. The bank takes reasonable steps to meet the guarantor, in person or remotely, without the borrower present. This meeting isn’t needed if the guarantor or their lawyer confirms they’ve received independent legal advice.
5. Confirm independent legal advice. Westpac requires it, as at October 2026. CBA requires legal advice and a signed statutory declaration for Family Security Support.
6. Wait out the disclosure period. Under paragraph 112, the bank won’t accept the guarantee until the third day after disclosure. Confirmed independent legal advice lets it accept sooner.
7. Sign the guarantee. CBA gives the guarantor a deed of guarantee and a guarantor acknowledgement form. The guarantor signs before an eligible witness, without the borrower present.

The guarantor can still withdraw by written notice before the loan funds. Under paragraph 122, they can also withdraw later if the signed loan differs materially from the proposed one.

Future Release

A guarantee ends when the lender agrees it’s no longer needed, usually once your client’s equity lets the loan stand alone. Release isn’t automatic. At Westpac, as at October 2026, either the borrower or the guarantor can ask, and the lender checks the loan again.

• Equity and valuation. Westpac usually considers release once the LVR falls to where LMI isn’t needed, or when the borrower agrees to pay an LMI premium. A current valuation shows how much price growth has helped.
• Repayment conduct. Westpac also expects satisfactory repayments on all the borrowers’ loans.
• Serviceability. If release involves changing the loan, the lender assesses whether your client can service the new arrangement.

CBA’s July 2025 guide adds another way out. The guarantor can end their obligation by paying the maximum amount the guarantee covers.

Use the worked example to set expectations with both families. In Structure A, the loan must fall to $600,000, or the home’s value must reach $931,250, before the $745,000 loan sits at 80% on its own. The guide to removing a guarantor covers the release process from there.