What Are the Different Types of Guarantor Home Loans?

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When it comes to securing a home loan, a guarantor home loan option presents an alternative path for home buyers, particularly those with a smaller deposit. With a guarantor loan, a family member of the buyer offers their own property as additional security for the loan. This approach helps to reduce the risk for banks and lenders.

Types of guarantor home loans

Not all banks or lenders offer guarantor home loans. Typically, these loans prefer the

the guarantor to be an immediate family member, some banks or lenders may have a more flexible criteria offer depending on the circumstances. Here are some of the different types of guarantor loans:

Family or parent guarantee

This type of guarantor loan is primarily designed for parents of the home buyer to act as guarantors. While most guarantors provide property as security for the loan, some lenders may also accept a cash deposit as part of the loan security.

Security guarantee

This is when the guarantor provides their property as security for the home loan. If they have an existing mortgage on their property, the bank can take out a second mortgage as security.

Security and income guarantee

This type of guarantee is often used when a parent is assisting their child who is a student or with a low income to purchase a property. Similar to a security guarantee, this type of loan uses the property as security as well as the parent's income to demonstrate that the buyer can afford to service the loan.

Limited guarantee

Under this type of loan, the guarantor only guarantees a specific portion of the loan. This helps minimise their potential risk with their property. Once the buyer repays that specific portion of the loan, the guarantor is released and no longer liable for the home loan.

Please note, we do not participate in the Home Guarantee Scheme, Victorian Homebuyer Fund or other government home-buyer assistance schemes.

If you are eligible for the First Home Buyer Grant, these funds can't contribute to your 20% deposit. Please speak to your conveyancer on how best to approach this.

Each type of guarantor home loan offers unique benefits and features, hence, it's important to understand the differences and choose one that aligns with your financial circumstances.

Learn more about how a family guarantee works.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000. 

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.