A family pledge or family guarantee home loan is a way of getting a mortgage with support from a guarantor. This is usually a family member who owns a property and is willing to help you out.
Many lenders refer to these loans as family pledge loans. But in many cases you simply apply for an existing home loan and attach a guarantor to it. Family pledges or guarantee home loans aren't specific products themselves.
Buying a house with a family pledge makes it easier to get your loan approved because the guarantor offers your lender more security. But this is where it gets riskier too. Family and finance don't always mix. If you can't repay the loan, your family member might have to.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
A family pledge allows you to use the equity in your parents’ property or another family member’s property as security on a home loan. Guarantors are limited to immediate family members, including parents, grandparents and siblings.
The guarantor pledges to use their property to back your loan. If for whatever reason you can't repay the loan later, your lender may force your guarantor to pay all or part of your debt. This is what makes pledges risky.
While it was once standard practice to guarantee the entire loan and put your home on the line, today the security on the new home loan can be split and you can limit your guarantee. For example, the equity in your parents’ property may be used as security for 20% of the loan, while the property you are purchasing will be used as security for the other 80% of the loan. So if you’re helping your kids purchase a property for $500,000, your 20% guarantee is only $100,000.
What are the benefits of family pledges?
For the right type of borrower, a family pledge can be a life saver:
Access finance. Most loans will have a minimum deposit that will have to be paid upfront in order to be accepted. This will usually be around 20% or as low as 5%. With a family guarantee you may be able to borrow more money and provide less of a deposit, which will allow you to buy a home sooner.
Avoid LMI. Borrowing more than 80% LVR usually requires you to take out lender’s mortgage insurance (LMI), but a family guarantee means this extra expense can be avoided.
Increase borrowing power. A family guarantee can boost your borrowing power. The family guarantee will often be used to cover a deposit that can't be paid so you will be able to borrow close to 100% of the loan in some cases if properly secured. Often, guarantor borrowers can borrow 100% of a property value plus costs.
Eligible for FHOG. Taking out a family pledge home loan means you are still eligible for financial assistance through the First Home Owners Grant. In addition, it also means you will be eligible to access most mortgage products from a lender.
What are the drawbacks?
Putting the family home at risk. If you’re the guarantor you could be putting your family home at risk, so consider all your options before choosing this approach.
Not receiving expert advice. If you’re considering applying for a family guarantee home loan, it’s important that you seek out independent financial and legal advice first. You need to understand exactly what the guarantor will be liable for in the event that you default on the loan.
Not all banks offer family guarantees. Family pledge home loans aren’t offered by all lenders, so the best thing to do is approach a mortgage broker for advice tailored to your needs.
Which lenders accept family pledges?
Many Australian lenders accept family pledges or guarantees on many of their home loans, usually on a case by case basis. All of Australia's Big Four banks have some kind of policy supporting family pledges.
Be sure to check that your lender does accept pledges and check any eligibility criteria before you submit a full application. You don't want to waste time and get rejected after applying.
Image: Shutterstock
Why you can trust Finder's home loan experts
We're free
You won't pay any more by taking out a home loan with us. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare loans.
We're experts
We've researched and rated dozens of home loans as part of our Finder Awards. We provide unique insights and our in-house experts regularly appear on Sunrise, 7News and SBS News.
We're independent
Unlike other comparison sites, we're not owned by a third party. That means our opinions are our own and we work with lots of home loan lenders, making it easier for you to find a good deal.
We're here to help
Since 2014, we've helped 150,000+ people find a home loan by explaining the nitty gritty details simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
Frequently asked questions about Family pledge or guarantee home loans
A family guarantee is a type of guarantee that can be made to secure a property. This is done by securing the deposit shortfall to a property owned by the guarantor, such as your parents or a close family member. It is also known as a guarantor home loan.
A family pledge allows you to use the equity in your parents' property or another family member's property as security on a home loan. Guarantors are limited to immediate family members, including parents, grandparents and siblings.
While it was once standard practice to guarantee the entire loan and put your home on the line, today the security on the new home loan can be split and you can limit your guarantee. For example, the equity in your parents' property may be used as security for 20% of the loan, while the property you are purchasing will be used as security for the other 80% of the loan. So if you're helping your kids purchase a property for $500,000, your 20% guarantee is only $100,000.
How much do they have to guarantee? A common strategy is to guarantee enough equity so that the borrower avoids paying Lenders Mortgage Insurance (LMI). A parent will need to guarantee 20% of the purchase price of the new property if the borrower has no deposit. What can be bought with a family guarantee? The family guarantee can be used to buy a home or invest in residential property so buyers will be able to use normal home loans and investment home loans.
The family guarantee will allow you to:
Access finance. Most loans will have a minimum deposit that will have to be paid upfront in order to be accepted. This will usually be around 20%, or less if you pay LMI. With a family guarantee you may be able to borrow more money and provide less of a deposit which will allow you to buy a home sooner.
Avoid LMI. Borrowing more than 80% LVR usually requires you to take out lender's mortgage insurance, but a family guarantee means this extra expense can be avoided.
Increase borrowing power. A family guarantee can boost your borrowing power. The family guarantee will often be used to cover a deposit that can't be paid so you will be able to borrow close to 100% of the loan in some cases if properly secured. Often, guarantor borrowers can borrow 100% of a property value plus costs.
Eligible for FHOG. Taking out a family pledge home loan means you are still eligible for financial assistance through the First Home Owners Grant. In addition, it also means you will be eligible to access most mortgage products from a lender. Limit your guarantee. While the traditional approach is to guarantee the full loan, in many cases you have the option of guaranteeing just a portion of the loan, for example 20%. Once the standard LVR requirements of the loan product have been met due to loan repayments being made or a rise in the valuation of the home, the guarantee on the loan is released.
Putting the family home at risk. If you're the guarantor you could be putting your family home at risk, so consider all your options before choosing this approach. Not receiving expert advice. If you're considering applying for a family guarantee home loan, it's important that you seek out independent financial and legal advice first. You need to understand exactly what the guarantor will be liable for in the event that you default on the loan. Not all banks offer family guarantees. Family pledge home loans aren't offered by all lenders, so the best thing to do is approach a mortgage broker for advice tailored to your needs
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
Guarantor home loan options can help you buy a home, with a family member acting as a guarantor on your home loan. Learn how it works and if you qualify.
Yes, it is possible. In general, a family pledge allows you to use the equity of any property you own. It is best to get in touch with the lender to make sure you meet the requirements, and also consider the risks involved. It might be an idea to have a plan or goal for your child to refinance in five years once they’ve had some property price growth, to release your pledge, for instance?
To apply, you can click the Go to site icon on our page.
Currently, my dad is guarantor 100% for the property I am in. I am looking to refinance however most banks are only offering 20% from guarantor and rest I have to find. As this is not possible is there any banks out there that would do 100%?
For refinancing, the first that you’d do is to speak to your current lender if they can grant you a 100% loan. If not, you may consider other options. While it is very little to no 100% home loans offer, there are ways that you can apply for a refinanced mortgage with little equity such as through a guarantor loan.
There are lenders that can offer you up to 100% LVR with a guarantor loan. Please check your eligibility with lenders on the list. Most importantly, please seek to advise from a mortgage broker so they can provide you with options based on your needs. I hope this helps.
Generally, a guarantee will be released once the standard LVR requirements of the loan product have been met due to loan repayments or an increase in the valuation of the home. You can get more details on this by directly contacting the bank or lender.
Hi,
I am wanting to purchase a property of $180,000 with a guarantor I am just wondering what criteria is necessary such as do I need to have been in my jo for a certain time etc.
Generally, if you apply for a home loan, the lender would look at and assess your income, job stability, assets, debts, and credit rating. Please check our guide about home loan guarantors if you’re looking for a home loan with a guarantor.
I’d also recommend that you seek a piece of advice from a mortgage broker who will take all your circumstances into account and offer you a range of lending options.
My wife and I are 66 and would like to help our son buy a home, we have the money but if we use all our savings we will leave nothing for our on going future, can we help him without putting money out as he’ll inherit all our estate THANKS
Depending on your situation and the lender your son opts to go with, a guarantor option might be available. This will see some of your property go towards your son’s deposit. I recommend contacting one of the lenders on this page directly by selecting ‘Go to Site’ to head over to their website to apply.
I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan and read any disclosure documents (such as any Target Market Determination (TMD) and/or Product Disclosure Statement (PDS)) issued by the provider before making a decision.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
Is it possible to pledge your investment home which has doubled in value, but still has a mortgage on it for your child.
Hi Tash,
Yes, it is possible. In general, a family pledge allows you to use the equity of any property you own. It is best to get in touch with the lender to make sure you meet the requirements, and also consider the risks involved. It might be an idea to have a plan or goal for your child to refinance in five years once they’ve had some property price growth, to release your pledge, for instance?
To apply, you can click the Go to site icon on our page.
Cheers,
Sarah
Currently, my dad is guarantor 100% for the property I am in. I am looking to refinance however most banks are only offering 20% from guarantor and rest I have to find. As this is not possible is there any banks out there that would do 100%?
Hello Marianna,
Thank you for your comment.
For refinancing, the first that you’d do is to speak to your current lender if they can grant you a 100% loan. If not, you may consider other options. While it is very little to no 100% home loans offer, there are ways that you can apply for a refinanced mortgage with little equity such as through a guarantor loan.
There are lenders that can offer you up to 100% LVR with a guarantor loan. Please check your eligibility with lenders on the list. Most importantly, please seek to advise from a mortgage broker so they can provide you with options based on your needs. I hope this helps.
Regards,
Jhezelyn
Hi I have been a guarantor for some years now when does it stop and we get clear and our deeds are return to us regards
Hi Ivy,
Thanks for your question.
Generally, a guarantee will be released once the standard LVR requirements of the loan product have been met due to loan repayments or an increase in the valuation of the home. You can get more details on this by directly contacting the bank or lender.
Cheers,
Anndy
Hi,
I am wanting to purchase a property of $180,000 with a guarantor I am just wondering what criteria is necessary such as do I need to have been in my jo for a certain time etc.
Hi Tanya,
Thank you for contacting Finder.
Generally, if you apply for a home loan, the lender would look at and assess your income, job stability, assets, debts, and credit rating. Please check our guide about home loan guarantors if you’re looking for a home loan with a guarantor.
I’d also recommend that you seek a piece of advice from a mortgage broker who will take all your circumstances into account and offer you a range of lending options.
I hope this has helped.
Regards,
May
My wife and I are 66 and would like to help our son buy a home, we have the money but if we use all our savings we will leave nothing for our on going future, can we help him without putting money out as he’ll inherit all our estate THANKS
Hi Anthony,
Thanks for the question.
Depending on your situation and the lender your son opts to go with, a guarantor option might be available. This will see some of your property go towards your son’s deposit. I recommend contacting one of the lenders on this page directly by selecting ‘Go to Site’ to head over to their website to apply.
I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
I hope this helps,
Marc