It is usually the second question a first home buyer asks, right after “how much deposit do I need?” — and the answer is narrower than most families expect.
In Practice, It Is Nearly Always Parents
Almost every lender that offers guarantor loans accepts parents, including step-parents in most cases. Beyond that it varies considerably:
| Relationship | Typical lender position |
|---|---|
| Parents or step-parents | Accepted by essentially all lenders offering guarantees |
| Grandparents | Often accepted, with more scrutiny of income and exit plan |
| Siblings | Accepted by some lenders, declined by others |
| Extended family or friends | Rarely accepted |
This is genuinely one of the areas where which lender you apply to changes the answer. A family situation that one lender will not consider, another will.
The Equity Test
A guarantor needs enough usable equity, which is not the same as the value of their home. Lenders generally work to 80 per cent of the guarantor’s property value, less whatever they still owe.
A worked example on a guarantor home worth $900,000 with $200,000 still owing:
| Guarantor’s property value | $900,000 |
| 80% of value | $720,000 |
| Less the mortgage still owing | −$200,000 |
| Usable equity available to guarantee | $520,000 |
For context, a first home buyer purchasing at the Newcastle and Lake Macquarie median house of $1,059,758 with a 5 per cent deposit needs a guarantee of roughly $205,000. So the parents above would comfortably cover it.
The guarantor calculator does this both ways — it works out the guarantee needed and tells you whether the guarantor’s equity covers it.
What Else Lenders Look At
Their income and debts. A guarantor is assessed, not just their property. If they are carrying significant debt of their own, the lender may decline even where the equity is there.
Their age and how the guarantee ends. Older guarantors are not excluded, but lenders will want to understand how the guarantee would be dealt with if circumstances changed. A clear path to release helps considerably.
Where the property is. It must be in Australia. Some lenders will not accept rural or unusual properties as guarantee security.
Whether they already guarantee something else. Guaranteeing two children’s loans at once is possible but it stacks, and the second application is assessed knowing about the first.
The Questions to Settle First
These come up in every one of these conversations, and they are much better settled before an application than after:
- Are your parents planning to borrow themselves? A guarantee must be disclosed on their own applications and can reduce what they will be lent — even while your repayments are perfectly up to date. Downsizing, renovating or buying an investment property in the next few years all matter here.
- Is the guarantee limited in writing? A limited guarantee caps their liability at a stated figure. An unlimited one exposes them to the whole loan. Most lenders now limit as standard, but confirm it.
- Do both parents agree? If the guarantor property is jointly owned, both owners must sign. One reluctant owner ends the discussion, and that is a legitimate answer.
- What happens if your circumstances change? Redundancy, illness, separation. The guarantee does not disappear because your situation did.
They Must Get Independent Legal Advice
Lenders require guarantors to obtain independent legal advice before signing, and the adviser cannot be the same person acting for you. This is not a formality to rush — it exists so the guarantor hears the risks from someone with no interest in the loan going ahead.
ASIC’s Moneysmart is direct about what those risks are: a guarantor may have to repay the whole guaranteed amount plus interest, may lose the asset they used as security, may find their own borrowing restricted, and may have a default recorded against them.
ASIC also notes that if someone is being pressured into going guarantor, that can be a sign of financial abuse. If a family member is uneasy, no is a complete answer — and contributing to the deposit instead is a far lower-risk way to help.
Frequently Asked Questions
Can a sibling be a guarantor on a home loan?
Sometimes. Parents and step-parents are accepted by essentially every lender that offers guarantor loans, but siblings are accepted by some lenders and declined by others. Grandparents are often accepted with extra scrutiny of their income and exit plan, while extended family and friends are rarely accepted. Because policies differ so much, the lender you apply to can change the answer entirely.
How much equity does a guarantor need?
Lenders generally work to 80 per cent of the guarantor’s property value, less whatever is still owing. On a home worth $900,000 with $200,000 left on the mortgage, that is $720,000 less $200,000, or $520,000 of usable equity. The guarantor calculator works out the guarantee needed and whether the equity covers it.
Can my parents be guarantors if they still have a mortgage?
Yes. What matters is usable equity, not owning the home outright. Lenders take 80 per cent of the property’s value and subtract the debt still owing, so parents with a mortgage can often still cover the guarantee. Lenders also assess the guarantor’s income and debts, though, and may decline if they are carrying significant borrowing of their own, even where the equity is there.
What are the risks of being a guarantor on a home loan?
ASIC’s Moneysmart lists them plainly: a guarantor may have to repay the whole guaranteed amount plus interest, may lose the property used as security, may find their own borrowing restricted, and may have a default recorded against them. That is why lenders require guarantors to get independent legal advice before signing, from someone who is not acting for the borrower. If a family member feels pressured, no is a complete answer.
Before You Ask Anyone
Check whether you need a guarantor at all. Since 1 October 2025 the Australian Government 5% Deposit Scheme has had no income caps and no waitlists, and because Newcastle and Lake Macquarie are listed regional centres, the price cap here is $1,500,000 rather than the $800,000 that applies to much of regional New South Wales.
If you have 5 per cent saved and your purchase is under that cap, you may be able to do this without involving anyone’s home. That is a much easier conversation to have with your parents than the alternative.
Our full guide to guarantor home loans covers how the structure works and how release happens, and David works with families across Newcastle and Lake Macquarie — usually with the parents in the room.
Want to talk through what this means for your situation? Call David on 0417 676 191 or get in touch via our contact form.
This article is general information only and does not take into account your objectives, financial situation or needs. Figures are illustrative and current as at the date of publication. Interest rates, lender policies and government scheme rules change — please seek advice specific to your circumstances before acting.
Sources
- ASIC Moneysmart, Going guarantor on a loan, last updated 9 September 2026.
- Australian Government, 5% Deposit Scheme — Property Price Caps.
- Median values: Cotality Home Value Index, three months to end August 2026, as reported by the Newcastle Herald.
- Lender positions on relationships and equity vary. The figures here are typical, not universal — confirm with the specific lender.
Ready to move forward?
Have questions about anything in this article? David from Rebus Finance can help with a free, no-obligation chat.