Find and compare guarantor home loans

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Advertised Rate

2.09%

Variable

Comparison Rate*

2.12%

Company
Yard
Repayment

$1,285

monthly

Features
Redraw facility
Offset Account
Borrow up to 70%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

4.08

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Winner of Best refinance home loan, RateCity Gold Awards 2021

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Advertised Rate

2.54%

Variable

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2.55%

Company
Suncorp Bank
Repayment

$1,352

monthly

Features
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.30

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Advertised Rate

2.59%

Variable

Comparison Rate*

2.60%

Company
HSBC
Repayment

$1,359

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Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.13

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Advertised Rate

1.99%

Fixed - 3 years

Comparison Rate*

2.61%

Company
Reduce Home Loans
Repayment

$1,270

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Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

4.04

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Winner of Best 3 year fixed pi, RateCity Gold Awards 2021

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Advertised Rate

2.68%

Variable

Comparison Rate*

2.73%

Company
Heritage Bank
Repayment

$1,373

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.14

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Advertised Rate

1.89%

Fixed - 2 years

Comparison Rate*

2.94%

Company
Suncorp Bank
Repayment

$1,256

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.54

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Advertised Rate

2.29%

Fixed - 3 years

Comparison Rate*

3.13%

Company
Heritage Bank
Repayment

$1,314

monthly

Features
Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.79

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Product
Advertised Rate

2.79%

Fixed - 3 years

Comparison Rate*

4.46%

Company
CUA
Repayment

$698

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.71

/ 5
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Learn more about guarantor home loans

What are guarantor home loans?

Guarantor home loans are mortgages where the applicant has a guarantor who will take responsibility for the home loan repayments should the applicant default. 

A guarantor is typically a parent or close family member of the applicant, using the value of the equity in their own home as additional security. The guarantor may agree to guarantee the full mortgage, or may choose a limited guarantee that only covers part of the loan. This may allow a borrower to buy property with a lower deposit and/or without having to pay Lender's Mortgage Insurance (LMI).

Guarantor home loans are sometimes considered bad credit home loans, as they can help applicants who don’t have a good credit score.

Who offers guarantor home loans?

Guarantor home loans are offered by a limited number of lenders in Australia. Each of these lenders has its own unique criteria – including who can and can’t be a guarantor – so check your eligibility and the product disclosure statement before completing a loan application.

How much will a guarantor home loan cost me?

Like any other home loan, the cost of a guarantor home loan will depend on your loan amount, loan term, interest rate and any fees. For example, if you took out a $400,000 guarantor mortgage over 30 years with a 4 per cent interest rate and a $10 monthly fee, you'd pay $1,920 per month, for $691,078 in total (plus stamp duty, and any other upfront or ongoing fees and charges). You can use a home loan calculator to estimate the cost of your mortgage repayments.

Keep in mind that a guarantor home loan may charge higher interest rates and fees than some other home loans on the market. Once you've had some time to make repayments on your mortgage and build up equity in your property, you may be able to refinance onto a lower-rate home loan without the need for a guarantor.

How do you compare guarantor home loans?

When comparing any loans, such as guarantor home loans or bad credit home loans, you should consider the interest rate, fees, features and repayment schedule.

Comparing guarantor mortgages can help you secure the best rate and choose the features that suit you.

When you compare loans, it’s best to pick a loan that you are confident in repaying so that you don’t default on your payments.

What are the benefits of guarantor home loans?

If you take out a guarantor home loan, you might be able to:

  • Enter the market sooner if you're a first home buyer 
  • Qualify for discounted interest rates
  • Avoid paying lender's mortgage insurance (LMI)
  • Buy a new home or investment property with a more expensive purchase price

Can you use guarantor loans alongside other government grants?

Combining a guarantor home loan with government grants and concessions may allow you to purchase property with additional support.

For example, a first home buyer may be able to use their state’s First Home Owner’s Grant (FHOG), the First Home Super Saver Scheme (FHSSS) or the federal government’s First Home Loan Deposit Scheme (FHLDS) to make up for part of the home loan’s required deposit. A guarantor may be able to cover the remaining deposit, which may also help to limit the level of risk to the guarantor.

Check with your mortgage lender and your local or federal government office to confirm the eligibility requirements for both a guarantor home loan and any other available grants or support services.

How can you improve your chances of being approved for a guarantor home loan?

To improve your chances of being approved for a guarantor home loan, check the lending criteria. Some lenders only allow a parent to be a guarantor, while others may have more relaxed rules. Choosing a guarantor who has good credit and a close personal relationship to you can help you secure a guarantor home loan.

Also, it’s important to explore ways to make yourself look like a more reliable (and therefore less risky) borrower. Here are five ways you might be able to achieve that goal:

  1. Increase your income: Get a second job, work more hours, ask for a raise
  2. Reduce your spending: Cut back on non-essentials like socialising, booze, clothes, holidays, taxis
  3. Increase your savings: Sell unwanted items
  4. Boost your employment profile: Stay in your job for longer, ask to move from casual or part-time to full-time
  5. Cut back on credit cards: Lower your credit limit or even cut up your card

Who can act as a guarantor?

Most banks only allow parents to be guarantors for home loans. Some will consider guarantees from immediate family members like siblings, grandparents, spouses, de facto partners or adult children. Close friends and workmates are usually not accepted. If your guarantor is someone other than your parents, you may have to meet other lending conditions to qualify as a borrower. 

How do you take out a guarantor home loan?

Taking out a guarantor home loan is a more time-consuming and complicated process than taking out an ordinary home loan.

With an ordinary home loan, only the borrower needs to provide proof of identity, income, savings and assets, but with a guarantor home loan, the guarantor also has to take all of these steps. The lender may conduct a valuation of the guarantor's property to confirm that they have sufficient equity to guarantee the loan. 

Also, the guarantor will have to provide a legal promise to pay off the mortgage in the event that the primary borrower fails to do so.

What are the pros and cons of guarantor home loans?

While guarantor home loans can have a big upside, they can also have serious consequences and so should never be entered into lightly. 

When guarantor home loans work well, they allow Australians with small house deposits and/or bad credit to become first-time home owners and enter the property market ahead of schedule, qualify for cheaper interest rates, or avoid paying lender’s mortgage insurance (LMI). In an ideal scenario, the borrowers then make all their repayments on time, so that the lender never has to trigger the guarantee.

But not all guarantor home loans go according to plan. Some borrowers fail to make repayments – perhaps because they lose their job or get a divorce. When that happens, the guarantor is expected to make the repayments. This might force parents to postpone their retirement, come out of retirement, sell the family home or some combination of the above. That in turn might lead to a breakdown in the relationship between the borrower and the guarantor.

What are some alternatives to guarantor home loans?

If you’re struggling to save up for a deposit or need a home loan with bad credit, there are alternatives to guarantor home loans. 

A parent-assisted home loan is one option, which resembles receiving a gifted deposit. As a gifted deposit won't count as genuine savings, you will have to pay back this gift to your parents with interest for it to be accepted by a lender.

Another option is to take out a mortgage with a loan to value ratio (LVR) of 95 per cent or even 97 per cent. While this means saving up a much smaller deposit compared to the property's value, you'll also need to consider the cost of Lenders Mortgage Insurance (LMI).

Both of these options are potentially risky, so it’s best to get independent financial advice first to see what may best suit your financial situation. For example, you could consider contacting a mortgage broker.

Example: Jennifer’s parents must pay

Jennifer and her partner wanted to buy their first home, and asked Jennifer’s parents to guarantee the loan. She assured them that repayments would be made on time, but a few months after securing the loan, Jennifer lost her job, her partner ended the relationship and both parties stopped making repayments. As such, Jennifer’s parents became responsible for the entire loan. Although they had agreed to act as a guarantor, the situation caused a high level of frustration and conflict between Jennifer and her parents. 

What are guarantor loans called?

When you're researching guarantor loans, remember that some lenders use different names for these loan products, such as ‘Family Pledge’, ‘Family Equity’, ‘Family Support’, ‘Family Guarantee’ and ‘Fast Track’. But whatever the name, they all refer to a security guarantee.

There are differences between every lender’s credit guidelines, loan types and discounts for family guarantee loans. Doing your own homework can lead to savings.

Should I be a guarantor?

Becoming a guarantor is a major decision so it pays to seek independent financial advice before you jump in, and try to answer these questions:

  • How big is the guarantee that you are committing yourself to? Can you cover the ongoing mortgage payments if the borrower folds?
  • When will you be liable to cough up money? Usually, banks and other lenders will proceed if the mortgage is in arrears for three to six months.
  • How credible is the person that you are acting as guarantor for? One has to be brutally honest in answering this, especially if it involves your own son or daughter.

Keep in mind that becoming a guarantor can 'tie up' the equity in your own property, so you may not be able to use it to secure other credit products. Becoming a guarantor can also affect your credit score.

How long will a guarantor home loan last for the guarantor?

Like most other mortgages, a guarantor home loan will typically run for 20 to 30 years or longer. However, a guarantor may not need to have their own finances tied up in this loan for the full mortgage term. 

Once a borrower has paid their loan for a few years, and has built up equity in their property, they may be in a position to refinance their mortgage. Depending on their financial situation, they may no longer need a guarantor when they refinance, as the equity in their property may be enough to cover the required home loan deposit.

This could let their guarantor off the hook, “freeing up” the equity in their own property for use elsewhere.

Do I need expert advice if I’m a guarantor?

Being a home loan guarantor is a big commitment and you should seek expert financial and legal advice from appropriate professionals.

It is desirable that before applying you have a preliminary discussion with your lawyer and then put the “guarantee and indemnity’ documents for legal scrutiny before signing on the dotted line.

One should also have an exit strategy in mind. For example, if the loan is for 25 years, you don't have to be involved for that period. Extra payments and refinancing can help remove the guarantee in two to five years.

The guarantor’s risk can also be minimised by their children if they procure insurance for their own mortgage so the guarantor’s property is protected.

Frequently asked questions

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

What if I can't pay off my guaranteed home loan?

If you can’t pay off your guaranteed home loan, your lender might chase your guarantor for the money.

A guaranteed home loan is a legally binding agreement in which the guarantor assumes overall responsibility for the mortgage. So if the borrower falls behind on their mortgage, the lender might insist that the guarantor cover the repayments. If the guarantor fails to do so, the lender might seize the guarantor’s security (which is often the family home) so it can recoup its money.

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How do guaranteed home loans work?

A guaranteed home loan involves a guarantor (often a parent) promising to pay off a mortgage if the principal borrower (often the child) fails to do so. The guarantor will also have to provide security, which is often the family home.

The principal borrower will usually be someone struggling to find the money to enter the property market. By partnering with a guarantor, the borrower increases their financial power and becomes less of a risk in the eyes of lenders. As a result, the borrower may:

  • Qualify for a mortgage that they would have otherwise been denied
  • Not be required to pay lender’s mortgage insurance (LMI)
  • Be charged a lower interest rate
  • Be charged less in fees

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

Does Westpac offer loan maternity leave options?

Having a baby or planning for one can bring about a lot of changes in your life, including to the hip pocket. You may need to re-do the budget to make sure you can afford the upcoming expenses, especially if one partner is taking parental leave to look after the little one. 

Some families find it difficult to meet their home loan repayment obligations during this period. Flexible options, such as the Westpac home loan maternity leave offerings, have been put together to help reduce the pressure of repayments during parental leave.

Westpac offers a couple of choices, depending on your circumstances:

  • Parental Leave Mortgage Repayment Reduction: You could get your home loan repayments reduced for up to 12 months for home loans with a term longer than a year. 
  • Mortgage Repayment Pause: You can pause repayments while on maternity leave, provided you’ve made additional repayments earlier.

When applying for a home loan while pregnant, Westpac has said it will recognise paid maternity leave and back-to-work salaries. All you need is a letter from your employer verifying your return-to-work date and the nature of your employment. Your partner’s income, government entitlements, savings and investments will may help your application.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Can I apply for an ANZ non-resident home loan? 

You may be eligible to apply for an ANZ non-resident home loan only if you meet the following two conditions:

  1. You hold a Temporary Skill Shortage (TSS) visa or its predecessor, the Temporary Skilled Work (subclass 457) visa.
  2. Your job is included in the Australian government’s Medium and Long Term Strategic Skills List. 

However, non-resident home loan applications may need Foreign Investment Review Board (FIRB) approval in addition to meeting ANZ’s Mortgage Credit Requirements. Also, they may not be eligible for loans that require paying for Lender’s Mortgage Insurance (LMI). As a result, you may not be able to borrow more than 80 per cent of your home’s value. However, you can apply as a co-borrower with your spouse if they are a citizen of either Australia or New Zealand, or are a permanent resident.

Why should I get an ING home loan pre-approval?

When you apply for an ING home loan pre-approval, you might be required to provide proof of employment and income, savings, as well as details on any on-going debts. The lender could also make a credit enquiry against your name. If you’re pre-approved, you will know how much money ING is willing to lend you. 

Please note, however, that a pre-approval is nothing more than an idea of your ability to borrow funds and is not the final approval. You should receive the home loan approval  only after finalising the property and submitting a formal loan application to the lender, ING. Additionally, a pre-approval does not stay valid indefinitely, since your financial circumstances and the home loan market could change overnight.

 

 

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002