Helping Your Child Get Into Their First Home with a Guarantor Loan.

As a parent, watching your child navigate the property market can be tough, especially when they’re working hard, paying rent, and doing their best to save. The good news is there’s a way you might be able to help, without needing to hand over a cent.

A guarantor loan lets you use the equity you’ve built in your own home to help your child secure theirs.

How Does It Work?

By agreeing to be a guarantor, you’re using the equity in your property as additional security on your child’s home loan. Here’s what that means in practice:

• Your equity bridges the deposit gap. Your property acts as additional security, usually enough to bring your child’s loan-to-value ratio (LVR) down to 80%, a key threshold for lenders.
• Your child’s home is the primary security. The lender holds a mortgage over both properties, but your child’s new home is front and centre.
• You won’t be making any repayments. Your child must be able to service the entire loan on their own income. You’re providing security, not financial contributions each month.
• Your child could save thousands. One of the biggest advantages is potentially avoiding Lenders Mortgage Insurance (LMI) altogether, which can save your child a significant amount upfront.
• It’s not a permanent arrangement. Once your child has built up enough equity in their property, through repayments, extra contributions, or property value growth, you can apply to be released from the guarantee.

Who Can Be a Guarantor?

Guarantors are generally limited to immediate family members. Parents are the most common choice, but depending on the lender, siblings and grandparents may also be eligible.

What Does It Mean for You If Things Go Wrong?

It’s important to go into this with a clear picture. If your child were unable to meet their loan repayments, the lender could pursue you for the amount covered under the guarantee.

That’s why anyone considering becoming a guarantor should seek independent legal and financial advice beforehand, and most lenders will require this as part of the process. It’s a sensible step that protects you, your child, and your property.

Thinking About It?

If you’d like to explore whether a guarantor loan is the right option for your family, we’re here to help. We can walk you through the details, answer your questions, and look at all the options available to you and your child.

Get in touch today — it could be the conversation that helps your child get the keys to their first home.