Perth property prices have climbed sharply in recent years, pushing the deposit goal further away for many first home buyers. A guarantor home loan lets a parent or close family member use their own property as security so you can buy sooner, skip Lenders Mortgage Insurance, and keep more cash in your pocket from day one.
What Is a Guarantor Home Loan?
A guarantor home loan is a lending arrangement where a family member, most commonly a parent, offers the equity in their own property as additional security for your loan. Rather than gifting or lending you cash, your guarantor essentially co-signs a portion of the mortgage, reducing the lender’s risk and unlocking borrowing power you would not otherwise have.
If you are a first home buyer in Perth struggling to reach the standard 20% deposit threshold, this arrangement can be transformative. Instead of waiting years to save, you may be able to purchase now while Perth property values continue to move.
The guarantee is typically limited, meaning the guarantor’s liability is capped to the shortfall amount rather than the full loan, which limits the risk for parents while still giving you the boost you need.
How Does a Guarantor Loan Work in Practice?
Here is a straightforward example. Say you want to buy a $650,000 home in Perth. A standard lender would want a 20% deposit of $130,000 to avoid Lenders Mortgage Insurance (LMI). If you have saved $65,000, you are halfway there but still well short.
With a guarantor arrangement, your parents can offer $65,000 worth of equity in their home as a limited guarantee. The lender now has the security it needs across two properties, your loan is approved, and you avoid thousands in LMI costs.
Once your loan-to-value ratio drops below 80% through repayments or property growth, your parents can typically be released from the guarantee. A good mortgage broker will structure the loan so this release happens as quickly as possible.
Security Guarantee
The most common type. Parents use home equity to top up your deposit security, allowing you to borrow up to 105% of the purchase price in some cases.
No LMI Required
Lenders Mortgage Insurance can add tens of thousands of dollars to a loan. A guarantor loan typically eliminates this cost entirely.
Limited Guarantee
Most lenders will cap the guarantee to the specific shortfall amount rather than the whole loan, protecting your parents’ broader financial position.
Release Conditions
Once your loan-to-value ratio improves, your parents can apply to be released. Your broker can help you reach this milestone faster.
Who Can Act as a Guarantor?
Most lenders require the guarantor to be an immediate family member. In practice, this usually means:
Parents are the most common guarantors, and lenders are generally most comfortable with this arrangement. Some lenders also accept siblings, grandparents, or even de facto partners in certain circumstances. The guarantor must own property in Australia with sufficient equity and must meet the lender’s own credit and income assessments.
Importantly, lenders will require your parents to obtain independent legal and financial advice before signing. This is not just red tape; it protects everyone in the transaction and ensures your parents fully understand their obligations.
The Steps to Setting Up a Guarantor Loan in Perth
Speak to a Mortgage Broker First
Not every lender offers guarantor loans, and policies vary significantly. An experienced Perth mortgage broker will assess your full situation and match you to the right lender from the outset.
Assess the Guarantor’s Equity Position
Your parents will need an up-to-date property valuation to confirm how much usable equity they have. Your broker can coordinate this with the lender.
Get Pre-Approval
With all parties assessed, your broker submits for pre-approval. This gives you confidence to make an offer and confirms your maximum borrowing capacity.
Independent Legal Advice for Guarantors
Your parents must see a solicitor independently to review the guarantee documents. This is a legal requirement and a sensible safeguard.
Settlement and Ownership
Once all documents are signed, settlement occurs and you take ownership of your new Perth property.
Work Toward Releasing the Guarantee
With a plan in place, you make regular repayments and let property growth work in your favour until the guarantee can be removed, freeing your parents from any obligation.
Risks to Understand Before Proceeding
A guarantor arrangement can be an excellent tool, but it comes with real obligations. If you fall behind on repayments, the lender can pursue your parents for the guaranteed amount. In a worst-case scenario, their property could be at risk.
Our advice: Only enter a guarantor arrangement if you have a stable income, a realistic budget, and a clear plan to reduce the guarantee quickly. The team at Central Lending Solutions will always walk through the full picture with you before recommending this path.
Other considerations include the potential impact on your parents’ borrowing capacity while the guarantee is active, and stamp duty obligations in Western Australia. Your broker and solicitor will walk through all of these with you before anything is signed.
Guarantor Loans and the Perth Property Market in 2026
Perth remains one of Australia’s most active property markets. For buyers who have been saving patiently, a guarantor loan can bridge the gap between where you are now and where you need to be, without waiting another two or three years while values continue to rise.
Combined with government schemes such as the Keystart Home Loan or the First Home Guarantee, a guarantor arrangement can dramatically reduce the upfront capital required and get you into your home years sooner.
If you have a low deposit and willing parents with equity in their home, the combination of options available in 2026 is genuinely powerful. Getting clear advice early makes all the difference.
Frequently Asked Questions
Does my guarantor have to own their property outright?
No. Your guarantor does not need to own their property outright, but they must have sufficient equity in it. Most lenders will assess the available equity after any existing mortgage balance is deducted. The amount of equity needed depends on the size of your deposit shortfall. Your mortgage broker will confirm exactly how much equity is required before you proceed.
Will a guarantor loan affect my parents’ ability to borrow?
Yes, while the guarantee is active it will appear as a contingent liability on your parents’ financial profile. This could reduce their borrowing capacity if they wanted to take out a new loan of their own. However, once you have built enough equity to release the guarantee, their position returns to normal. This is one reason why working toward an early release is a priority we set for every guarantor loan we arrange.
How long before my parents can be removed from the guarantee?
This depends on how quickly your property grows in value and how much of the loan you repay. In many Perth cases, buyers have been able to release their guarantors within two to five years. A structured plan with extra repayments and a rising market can accelerate this significantly. The refinancing process is typically straightforward once the loan-to-value ratio drops below 80%.
Can I use a guarantor loan with a First Home Owner Grant in WA?
Yes. The Western Australian First Home Owner Grant and a guarantor home loan are separate arrangements and can generally be used together. The grant provides eligible first home buyers with a cash contribution toward their purchase, while the guarantor arrangement addresses the deposit security requirement. Your broker will confirm eligibility based on your individual circumstances and ensure all schemes are applied correctly.
What happens if I cannot make my repayments?
If you default on your loan, the lender has the right to recover the guaranteed amount from your guarantor. In serious cases this could put your parents’ property at risk. This underscores why it is essential to enter this arrangement only if your income and budget are solid, and why sound financial planning is in place from the start. Lenders are also required to work with borrowers in hardship before taking enforcement action.
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Our experienced brokers have helped thousands of Perth buyers structure guarantor loans that work for the whole family. There is no cost to you for our service.
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