Let’s be honest. The Australian property market is not what it was for the generation before us.
When your parents bought their first home, a deposit was something you could save in a couple of years on an average wage. The conversation was simpler: work hard, save up, buy.
Today, that conversation looks different.
Brisbane median house prices have more than doubled over the past decade. Saving a 20% deposit on a $750,000 home means finding $150,000, before you factor in stamp duty, legal fees, inspections, and moving costs. For most young Australians working full-time, renting, and trying to actually live their lives, that number is not just difficult. It can feel impossible.
But here’s what I’m seeing every week at Grow Well Financial: young Australians are buying. They’re not waiting until they’ve scraped together a full deposit on their own. They’re entering the market with a strategy, and increasingly, that strategy involves their parents.
Mum and Dad guarantor loans have become one of the most powerful tools available to first-home buyers in Australia right now. And when they’re set up correctly, they work.
Why Saving a Full Deposit Is Harder Than It Sounds
Before we get into guarantor loans, it’s worth understanding the real maths behind deposit saving, because a lot of first home buyers come to us thinking they’re “almost there” when they’re actually further away than they realise.
Here’s the reality of saving a 20% deposit in today’s Brisbane market:
Home Purchase Price | 20% Deposit Required | Est. Additional Costs (Stamp Duty, Legals, etc.) | Total Cash Needed |
$600,000 | $120,000 | ~$20,000–$25,000 | ~$140,000–$145,000 |
$750,000 | $150,000 | ~$25,000–$30,000 | ~$175,000–$180,000 |
$900,000 | $180,000 | ~$30,000–$35,000 | ~$210,000–$215,000 |
Note: Stamp duty varies based on eligibility for first home buyer concessions. This is general information only.
And while you’re saving, property values don’t pause. If prices are growing faster than you can save (which has been the case in many Brisbane suburbs), you end up running on a treadmill. You save $20,000, and the required deposit grows by $30,000. Frustrating doesn’t begin to cover it.
This is the gap that a mum and dad guarantor loan is designed to close.
What Is a Mum and Dad Guarantor Loan, Really?
A guarantor loan (sometimes called a family pledge loan or a family guarantee home loan) is a lending arrangement where a parent (or another close family member) uses the equity in their own property as additional security for your home loan.
Here’s the critical thing to understand: they are not giving you cash. They are not co-buying the property with you. They are not in the title.
They are lending the bank the security of their property to help bridge the gap between what they have and what they need.
A practical example:
You want to buy a home in Brisbane for $700,000. You’ve saved $35,000, about 5% of the purchase price. Without a guarantor, a 5% deposit would mean paying Lenders Mortgage Insurance (LMI), which can add tens of thousands of dollars to the cost of your loan.
Your parents own their home in Chermside outright and have $250,000 in available equity. They agree to act as guarantors and put up $105,000 of that equity as additional security. Combined with your $35,000, the bank now sees 20% security and approves your loan, without LMI.
You get the keys. Your parents don’t hand over a cent.
How the Numbers Actually Work
This is where it helps to be concrete. The guarantor arrangement works in layers.
Your loan is still in your name. You are the borrower. You make the repayments. You own the property.
Your parents’ guarantee is limited in scope. Most lenders use what’s called a limited guarantee, which means your parents’ liability is capped, typically to the amount needed to bring the security up to 20% of the purchase price, rather than the full loan amount. This is an important distinction from older-style unlimited guarantees, which some parents are wary of for good reason.
Once you’ve built equity, either through repayments, property growth, or both, the guarantee is released. Most families target a release when the loan-to-value ratio (LVR) reaches 80%, meaning you now have 20% equity in your own right. At that point, the bank no longer needs the parents’ property as security and the guarantee is formally discharged.
The timeline varies. Some families achieve this in three to five years. Others take longer. A lot depends on the property market and how much you’re paying off.
The Real Conversation: What Mum and Dad Need to Know
This is probably the most important section of this article, because the guarantor arrangement involves real risk for your parents, and brushing over that does no one any favours.
Here’s what parents need to genuinely understand before they sign:
Their Property Is on the Line (To a Point)
If you, as the borrower, cannot make your repayments and the property is sold, and the sale doesn’t cover what is owed, the lender can call on the guarantee. This means they may have to cover the shortfall using their own property as security.
This is rare when the loan is set up correctly and the borrowing is sensible. But it is a real legal obligation, not a formality.
It Can Affect Their Own Borrowing Power
Having a guarantee in place is recorded against your parents’ credit profile. If they’re looking to refinance their own mortgage, access equity, or take out any other lending while the guarantee is active, lenders will factor this obligation in. In some cases, it can reduce what they can borrow.
They Have No Ownership, But They Do Have Liability
Your parents don’t own any part of your home. They can’t make decisions about it, can’t benefit from its sale, and don’t have any legal say over what you do with it. But they are still legally responsible for the guarantee amount. This asymmetry is something all parties should understand clearly going in.
The Guarantee Needs an Exit Plan
One thing I always work through with families is a clear strategy for releasing the guarantee. It shouldn’t be open-ended. You should know roughly when you expect to get there and what triggers the release conversation. This protects the relationship as much as it protects the finances.
If you’d like a deeper dive into how guarantor loans work in practice, including the risks and release process in detail, our earlier article Guarantor Loans in Australia: A Practical Guide for Families covers this thoroughly.
Who Is This Right For?
Not everyone should use a guarantor loan, and not every family is in a position to offer one. Here’s an honest look at when it makes sense, and when it does not.
It’s Often the Right Move When…
You have a high income but limited savings. If you’re earning well but have only been in your career a few years, or you’ve been paying down HECS debt, or you’ve been renting at high rates in Brisbane, your income supports the repayments, but the deposit just isn’t there yet. A guarantor bridges that gap without making you wait.
Your parents have significant equity and a clear mortgage. The parents who are best placed to guarantee are those who own their home outright or are well ahead on their mortgage, and who are some years from retirement. Their equity is available; their own financial position is secure.
There’s a clear plan for exit. When both parties understand roughly when and how the guarantee will be released, the arrangement feels less open-ended and more like what it is: a temporary structure that gets you started.
You’ve done the numbers honestly. The best guarantor loan scenarios I’ve seen are ones where the borrower can genuinely service the loan, not just on paper, but in real life. The repayments fit the budget with room for life to happen.
It’s Worth Reconsidering When…
Your parents are approaching retirement. If Mum and Dad are in their late 60s and depending on their home equity for their retirement plans, tying that equity up in a guarantee needs very careful thought. Their financial security comes first.
The borrower is already financially stretched. If the mortgage repayments leave no room for an interest rate rise, an unexpected bill, or a change in income, that’s not a position a guarantor can fix. It’s a position that needs more time or a lower purchase price.
Family dynamics are already complicated. Money and family are a combination that can go either way. If there are existing tensions, different expectations, or a reluctance to have direct conversations about money, a guarantor arrangement can make things harder, not easier. It requires open, honest communication to work well.
What About Government Schemes?
Guarantor loans are one pathway. But they’re not the only option worth knowing about.
The First Home Guarantee (previously the First Home Loan Deposit Scheme) allows eligible first home buyers to purchase with as little as a 5% deposit, without paying LMI, because the federal government guarantees the remaining 15%. There are income caps and property price limits that vary by state, and places are limited.
Queensland also offers stamp duty concessions for first-home buyers that can meaningfully reduce upfront costs.
These schemes can be used alongside family support in some cases, depending on the lender and the structure. Getting advice early means you understand all the options available to you, not just the most obvious one.
What First Home Buyers Should Do Before Anything Else
If you’re reading this and thinking about buying your first home in Brisbane, here’s where to actually start:
Step 1: Get a real picture of your borrowing capacity. Not a rough number from an online calculator. A real assessment, done properly, by someone who knows how different lenders assess income, expenses, and debt. Borrowing capacity varies significantly between lenders, sometimes by hundreds of thousands of dollars.
Step 2: Have an honest conversation with your parents. Before any numbers are run, before any lenders are approached, have the real conversation. Are they willing? Are they able? Do they understand what they’re signing up for? That conversation shapes everything that follows.
Step 3: Understand the full cost of buying, not just the deposit. Stamp duty, legal fees, building and pest inspections, moving costs, lenders’ fees, and council rates adjustments at settlement. First home buyers often budget for the deposit and forget the rest. Build a complete picture.
Step 4: Get pre-approval before you start looking seriously. The Brisbane market moves fast. From the Gold Coast to Moreton Bay, from the inner suburbs to the outer ring, where competition for good properties is real. Having pre-approval in place means you move with confidence, not hesitation.
If you’d like to understand how pre-approval works in Queensland and what to watch out for, our article Home Loan Pre-Approval in QLD: The “Real Talk” Version is a good place to start.
Why the Right Broker Makes a Significant Difference Here
A guarantor loan is more complex than a standard home loan. The structure needs to work for the borrower AND the guarantor. The lender needs to be chosen carefully, as not all lenders handle guarantor arrangements the same way, and some are significantly more accommodating than others.
At Grow Well Financial, we work with over 40 lenders. We know which ones are most flexible with guarantor structures, which have the most straightforward release policies, and which are going to create the least friction for your family.
But more than that, we take the time to make sure everyone in the arrangement actually understands what they’re signing. Parents come to our strategy sessions. We go through the numbers. We explain the risks plainly, not buried in fine print, and we create a roadmap that everyone can see, including when and how the guarantee gets released.
Because the goal isn’t just getting you into a property. It’s making sure the arrangement works for your whole family, now and over time.
Ready to Find Out What’s Possible?
If you’re a first-home buyer in Brisbane or Queensland, and you’re wondering whether a mum and dad guarantor loan could work for your situation, the best first step is a conversation.
No commitment. No paperwork. Just a clear picture of where you stand and what your options actually are.
Book a free Discovery Call with Grow Well Financial →
Or reach out directly at hello@growwellfinancial.com.au or 0435 963 419.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Grow Well Financial Pty Ltd, ABN 63 647 350 445. Credit Representative 529592 is authorised under Australian Credit Licence 389328.
FAQs
Q: What is a mum and dad guarantor loan in Australia?
A: A guarantor loan is a home loan where a parent uses the equity in their own property as additional security for their child’s mortgage. This allows the borrower to purchase with a smaller deposit, sometimes as low as 5%, without paying Lenders Mortgage Insurance (LMI).
Q: Can my parents be the guarantor on my home loan in Queensland?
A: Yes. Most lenders in Australia allow parents to act as guarantors for a child’s first home loan, provided they own property with sufficient equity and meet the lender’s financial requirements.
Q: How long does a guarantor stay on a home loan?
A: A guarantor arrangement remains in place until the borrower has built sufficient equity, typically 20% of the property value, at which point a formal guarantor release can be requested. This usually takes between three and seven years,s depending on the property market and repayment history.
Q: Is a guarantor loan different from a co-borrower arrangement?
A: Yes. A guarantor does not own any portion of the property and is not named on the loan as a primary borrower. They provide security only. A co-borrower shares ownership and is jointly responsible for repayments.
Q: Do first home buyers in QLD have to pay stamp duty?
A: First home buyers in Queensland may be eligible for a stamp duty concession or exemption depending on the value of the property. Eligibility conditions apply, and a mortgage broker or conveyancer can confirm your specific situation.
