---
title: Guarantor Home Loans Melbourne | Buy With No LMI | GNT Finance
description: Buy in Melbourne with little or no deposit using a family guarantee. GNT Finance explains limited guarantees, avoiding LMI and releasing your parents later.
url: https://gntfinance.com.au/services/guarantor-home-loans/
section: services
updated: 2026-09-01
author: Gorakh Timilsina, GNT Finance
---

# Guarantor Home Loans

**In short:** A guarantor home loan lets a family member, usually a parent, offer equity in their own property as additional security so you can borrow up to 100% of a purchase price plus costs without paying lenders mortgage insurance. Most Melbourne lenders use a limited guarantee covering only the deposit shortfall, and it can be released once your loan falls to 80% of the property value.

Saving a 20% deposit in Melbourne can take the better part of a decade. A guarantor loan short-cuts that wait without the cost of LMI, which is why so many parents in Craigieburn, Greenvale and Roxburgh Park use their equity to help their children buy in Wollert, Kalkallo or Donnybrook. GNT Finance sets these loans up carefully, because a guarantee done badly can strain the family finances and the family itself.

## Who this suits

- First home buyers with steady income but a small deposit, who could comfortably afford repayments on a full loan
- Buyers with a 5–10% deposit who want to avoid LMI (often $15,000–$30,000 on a $650,000 purchase)
- Recent migrants on good incomes whose savings history is short
- Upgraders whose parents want to help without gifting cash

On the other side, a guarantor who owns property with plenty of equity, understands the risk and has no need to sell or borrow against it for a few years.

## Limited guarantee versus full guarantee

Nearly all family guarantees written today are **limited security guarantees**. The guarantor's property secures only a fixed slice of the loan, typically the amount needed to bring the borrower's own security to an 80% loan-to-value ratio. The guarantor is not liable for the whole loan and does not have to service any of it.

| Feature | Limited security guarantee | Full guarantee (rare today) |
|---|---|---|
| Guarantor's exposure | Fixed amount, e.g. $130,000 | Entire loan balance |
| Servicing required from guarantor | No | Sometimes |
| Can be released early | Yes, once LVR ≤ 80% | Only when loan repaid or refinanced |
| Guarantor income assessed | Usually not | Often |
| Lender appetite | Most major and regional lenders | Very few |

## How the numbers stack up

| Purchase price | Borrower deposit | Loan without guarantor (max 95% + LMI) | Loan with guarantor | Guarantee amount |
|---|---|---|---|---|
| $600,000 | $0 | Not possible | $624,000 (incl. costs) | approx. $144,000 |
| $650,000 | $32,500 (5%) | $617,500 + LMI ~$20,000 | $617,500, no LMI | approx. $97,500 |
| $750,000 | $75,000 (10%) | $675,000 + LMI ~$14,000 | $675,000, no LMI | approx. $75,000 |

The guarantee amount is roughly the difference between the loan and 80% of the purchase price, sometimes plus a small buffer. Check what a bank would charge you in LMI on our [LMI calculator](/calculators/lmi/) and what equity your parents have with the [equity calculator](/calculators/equity/).

## The GNT Finance process

1. **A conversation with everyone.** We meet you and your guarantor together (in Mickleham or by video) and explain exactly what is being guaranteed and how it ends.
2. **Assess the borrower.** The loan must be serviceable on your income alone. We check borrowing power, the APRA buffer of 3 percentage points above the actual rate, and your credit file.
3. **Assess the guarantor property.** The lender values the guarantor's home and confirms the equity available. If the guarantor still has a mortgage, it generally needs to be with the same lender or refinanced across.
4. **Choose the lender.** Lender policies differ on who can be a guarantor (parents, sometimes siblings or grandparents), whether a retired guarantor is acceptable, and how much of the costs can be capitalised. We match the right one.
5. **Independent legal advice.** Every lender requires the guarantor to get their own legal advice, separate from the borrower's solicitor, and most require a signed certificate. We build this into the timeline.
6. **Settlement, then a release plan.** From day one we schedule reviews. When your property value and repayments bring the LVR to 80% or below, we apply to release the guarantee.

## Eligibility and paperwork

**Borrower:** stable income sufficient to service the full loan, clean credit, and the lender's usual requirements. Genuine savings requirements are often waived with a guarantor, though some lenders still want to see a modest history.

**Guarantor:** Australian resident, usually an immediate family member, owns property with sufficient equity, and is not relying on the guaranteed property for retirement income. Some lenders decline guarantors over a certain age or on the age pension unless there is an exit strategy.

The borrower supplies payslips, bank statements, ID, the contract of sale and details of existing debts (see our [home loan documents checklist](/guides/home-loan-documents-checklist/)). The guarantor supplies ID, a council rates notice, current mortgage statements if any, and a certificate of independent legal advice before settlement.

## Worked example: parents in Greenvale, daughter buying in Wollert

Anita, 27, earns $95,000 as a nurse and has saved $25,000. She wants to buy a three-bedroom townhouse in Wollert for $620,000. Her parents own their Greenvale home worth $950,000 with a $150,000 mortgage remaining.

Without a guarantor: at 95% LVR Anita could borrow $589,000 but would need her $25,000 plus stamp duty and LMI of roughly $19,000, which she does not have.

With a limited guarantee:

| Item | Amount |
|---|---|
| Purchase price | $620,000 |
| First home buyer stamp duty (sliding concession) | approx. $8,000 |
| Legal and lender costs | approx. $2,500 |
| Total needed | approx. $630,500 |
| Anita's savings contributed | $25,000 |
| Loan | $605,500 |
| 80% of Anita's property | $496,000 |
| Limited guarantee from parents | approx. $110,000 |

Because Anita's home was new, she also qualified for the $10,000 First Home Owner Grant, which we applied toward her costs. For illustration, at 6.00% p.a. over 30 years, repayments on $605,500 are about $3,630 per month. Her parents' exposure is capped at around $110,000 and the loan is serviced entirely from Anita's income.

Three years later, with the townhouse valued at $690,000 and the loan paid down to $575,000, Anita's LVR is 83%. Another $23,000 of extra repayments, or a further lift in value, brings her to 80% and the guarantee is released. See how extra repayments accelerate this on the [extra repayments calculator](/calculators/extra-repayments/).

## Costs and fees

- No LMI, saving typically $10,000–$30,000
- Two valuations, often free with major lenders
- Guarantor's independent legal advice: commonly $300–$800
- Standard application, settlement and government registration fees
- A small discharge fee and valuation when the guarantee is released

Our service is at no cost to you for our home-loan service in most cases.

## Common pitfalls

**Guaranteeing more than necessary.** Some lenders default to guaranteeing the full 20% shortfall plus costs; we push for the minimum amount that achieves no-LMI.

**A guarantor who plans to sell or downsize.** The guarantee stays until released. If mum and dad want to sell in two years, the loan needs a clear path to 80% LVR before then.

**Tying up the guarantor's borrowing capacity.** A guarantee is recorded as a contingent liability and can reduce how much the guarantor can borrow for their own plans.

**Skipping the release.** Lenders will not proactively release a guarantee. We diarise it and apply when the numbers allow.

**No conversation about what happens if things go wrong.** If the borrower defaults and the property sells short, the lender can claim the shortfall (up to the guaranteed amount) from the guarantor. Read our page on [guarantor legal responsibilities](/legal/guarantor-legal-responsibilities/) together before proceeding.

## Why use a broker for a guarantor loan

Guarantor policies are among the most variable in Australian lending. One bank allows grandparents, another does not. One requires the guarantor's mortgage to be refinanced across, another accepts a second mortgage. Sending an application to the wrong lender burns a valuation, a credit enquiry and several weeks. GNT Finance knows these policies, and Gorakh Timilsina's background as a Senior Credit Officer means we structure the guarantee so both generations are protected, with the exit planned from day one. Our [buying with a guarantor guide](/guides/buying-with-a-guarantor/) goes deeper on the family conversation.

## Frequently asked questions

### Does a guarantor need to earn an income?

For a limited security guarantee, usually not. The guarantor provides equity, not income, and the borrower must service the loan alone. Some lenders are cautious about retired guarantors because the guarantee could put a pension-age home at risk, and may want to see an exit strategy such as the borrower reaching 80% LVR within a few years.

### Can my parents still refinance or borrow while they are guarantors?

Yes, but the guarantee counts as a contingent liability and reduces their borrowing capacity, and any refinance generally needs to stay with the same lender or the guarantee has to be moved. If your parents plan to renovate or buy an investment property soon, tell us early so we can pick a lender and structure that leaves room for it.

### How long does it take to release a guarantor?

Typically two to five years, depending on how quickly your loan-to-value ratio reaches 80% through repayments and property growth. Buyers in growth suburbs such as Wollert, Kalkallo and Donnybrook often get there sooner. Releasing involves a new valuation and a short application; the guarantee is discharged and your parents' title is cleared.

### What if I stop making repayments?

The lender must first try to recover its money from your property. If a sale leaves a shortfall, it can call on the guarantor for up to the guaranteed amount, and in the worst case could force a sale of the guarantor's home to recover it. This is why lenders insist on independent legal advice and why we plan the loan so it is comfortably serviceable.

### Can I combine a guarantor loan with the First Home Guarantee?

Generally you choose one or the other. The First Home Guarantee already removes LMI with a 5% deposit, so a guarantor adds little unless you have less than 5% or the property exceeds the $950,000 Melbourne price cap. For buyers with no deposit at all, or buying above the cap, the guarantor route is often the better fit. We compare both on our [low deposit home loans](/services/low-deposit-home-loans/) page.

## Talk to GNT Finance

If your family is thinking about a guarantee, the best first step is a conversation with everyone in the room. GNT Finance will show you the exact guarantee amount, the repayments and the path to releasing your parents, in English, Nepali or Hindi. [Book a free consultation](/contact/) or call 0426 403 703.

*This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.*