🏡 What is a Parental Guarantee?

Buying your first home can be tough, especially when saving a big deposit. That’s where a Parental Guarantee can make a huge difference.

A Parental Guarantee allows your parent(s) to use the equity in their own home as security for part of your loan. This means you may be able to buy with a smaller deposit and sometimes even with as little as 5% and avoid paying Lender’s Mortgage Insurance (LMI).

✅ How Does It Work?

Instead of handing over cash, your parent offers part of their home’s value to secure your loan. The bank sees this as additional security, reducing their risk and helping you borrow more, sooner.

For example:

- You’re buying a $600,000 home.

- You’ve saved $30,000 (5% deposit).

- Your parents offer a limited guarantee of $90,000.

- The bank treats your loan like you’ve got a 20% deposit—so no LMI is needed.

🔐 Limited Guarantee = Less Risk for Parents

Most lenders offer a limited guarantee, which means your parents are only guaranteeing the amount needed to bring your deposit up to 20%—not the full loan.

Once your loan-to-value ratio (LVR) drops below 80%, the guarantee can be released.

👨‍👩‍👧 Why Use a Parental Guarantee?

- ✅ Avoid LMI (can save you thousands)

- ✅ Buy sooner with a smaller deposit

- ✅ Increase your borrowing power

- ✅ Keep more of your savings for moving costs or emergencies

⚠️ Important Things to Know

- Your parents are legally responsible for the guaranteed portion if you can’t repay

- Their property may be at risk if repayments aren’t made

- Both you and your guarantor should get independent legal and financial advice

🏠 Let’s Make It Happen

At Personalised Finance, we’ll guide you and your family through the process from start to finish and making it smooth, secure, and stress-free. If your parents are open to helping, a parental guarantee could be your ticket to home ownership, sooner.

📞 Ready to get started? Let’s chat about your options today.