A Guarantor Loan is the most powerful way to get into the Gold Coast property market with a small deposit. This guide explains how you can use the 'Bank of Mum & Dad' to avoid paying thousands in LMI and potentially borrow 100% of the purchase price. Learn how the process works, who can be a guarantor, and how to set yourself up for success.
For many first home buyers, the biggest dream is owning a home on the Gold Coast, and the biggest challenge is saving the 20% deposit. But what if there was a way to get into the property market right now, with little to no cash deposit saved, and without paying a cent in Lenders Mortgage Insurance (LMI)?
Welcome to the power of a Guarantor Home Loan—the single most effective strategy to fast-track your way to homeownership.
What is a Guarantor Home Loan?
Think of a guarantor as a helping hand from your family. It's a special type of home loan where a close family member—usually a parent—uses the equity in their own property to provide additional security for your loan.
This extra security gives the bank the ultimate confidence to lend to you, even if you have a very small deposit. The guarantor doesn't need to give you any cash; they are simply offering their property as a back-up for a portion of your loan.
The Two Game-Changing Benefits
A guarantor loan is so powerful because it solves the two biggest problems for first home buyers:
- You Can Avoid LMI Entirely: Because the bank's risk is covered by the guarantee, they will waive the need for you to pay Lenders Mortgage Insurance. This can save you anywhere from $10,000 to $20,000 in upfront costs.
- You Can Borrow Up to 100% of the Purchase Price: In many cases, a guarantor loan can allow you to borrow the full purchase price of the property, plus the costs like stamp duty. This means you could get into your first Gold Coast home with virtually no cash savings required.
How Does It Work?
Your guarantor will need to be a close family member who owns property in Australia. The bank will place a limited guarantee on their property, typically for around 20% of the value of the home you're buying. This means their entire home is not on the line.
The Goal: Release the Guarantor ASAP
This arrangement isn't designed to last forever. The goal is always to release your guarantor from the loan as quickly as possible. This can usually be done in a few years, once you've paid down your loan or your property has increased in value to the point where your loan is less than 80% of its value. Once the guarantee is released, your parents' property is completely free and clear.
A guarantor loan is an incredible act of support from a family member, and it's our job to ensure it's structured safely and correctly for everyone involved.
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