Guarantor Loans Explained: Can You Buy a House with $0 Deposit in Australia?

Can You Buy a House with No Deposit in Australia? (Guarantor Loans Explained)

‘I don’t have a deposit saved yet — does that mean I can’t buy?’

It’s one of the most common questions that comes up in first conversations with first home buyers. And the honest answer is: not necessarily. For buyers who have family support available, there’s a legitimate, bank-approved pathway that doesn’t require you to have a cent of deposit saved called a guarantor loan.

This post explains exactly how guarantor loans work, who can be a guarantor, what the risks are, and whether this option might be right for your situation. We’ll cover the real mechanics, not just the headline.

What Is a Guarantor Loan?

A guarantor loan allows a close family member (in most cases a parent) to use the equity in their own property as additional security for your home loan.

Here’s the key distinction: your guarantor doesn’t give you any money. They don’t contribute to your deposit. They don’t make repayments. What they do is offer their property as security, which allows the lender to approve your loan even if you don’t have a cash deposit saved.

In practical terms, this means:

You can potentially borrow up to 100% of the purchase price (and in some cases, beyond this to cover purchase costs as well)
You avoid paying Lenders Mortgage Insurance, which can save you $10,000–$30,000+ depending on your loan size
Your guarantor retains ownership of their own property, it just has a security interest attached to it
Once you’ve built sufficient equity in your own property (typically once your LVR reaches 80%) the guarantor can be released

The Two Types of Guarantee

It’s worth understanding that there are two main types of guarantee structure:

Limited Guarantee

This is the most common and most recommended structure. Rather than guaranteeing your entire loan, your guarantor only guarantees a specific portion, typically just enough to bring your effective LVR to 80% (which avoids LMI without requiring a cash deposit).

For example: if you’re buying a $600,000 property, the lender typically needs to see an 80% LVR, meaning $480,000 or less in borrowing. If you’re borrowing $600,000, the gap is $120,000. A limited guarantee of $120,000 could cover that gap, using your guarantor’s property equity.

This limits the guarantor’s financial exposure to a specific amount rather than the entire loan, which is a much safer position for them.

Full Guarantee

Some older or more basic structures involve guaranteeing the full loan amount. This is less common with modern lenders and exposes the guarantor to significantly more risk. Most brokers and lenders would steer you toward a limited guarantee structure.

Who Can Be a Guarantor?

Lender policies on guarantors vary, but most restrict guarantors to immediate family members. Commonly accepted guarantors include:

Parents
Step-parents (some lenders)
Siblings (some lenders)
Grandparents (some lenders)

Spouses and de facto partners generally can’t act as guarantors for each other, they’d typically be co-borrowers instead. Friends, aunts, uncles, or more distant relatives are generally not accepted.

Beyond the relationship requirement, the guarantor typically needs to meet certain criteria:

Own a property in Australia with sufficient equity to cover the guaranteed portion
Have a reasonably clean credit history
Demonstrate they could service the guaranteed amount if called upon
Be willing to receive independent legal and financial advice, most lenders require this before proceeding

What Does ‘Sufficient Equity’ Mean?

The guarantor’s property needs to have enough equity (the difference between what it’s worth and what’s owed on it) to cover the guaranteed portion.

Using our earlier example: if a limited guarantee of $120,000 is needed, the guarantor’s property needs to have at least $120,000 in usable equity. In practice, lenders will assess the guarantor’s property value, any existing mortgage, and apply their own LVR limits to determine how much equity is available to use as security.

If your parents own their home outright (no mortgage), a large chunk of the property’s value is available as equity. If they still have a significant mortgage, the usable equity may be more limited.

What Does the Guarantor Actually Risk?

This is important, and something that needs to be discussed openly and honestly within the family before any application is submitted.

If you are unable to make your loan repayments, and the lender is forced to sell your property and still can’t recover the full loan amount, they can call on the guarantee. In a limited guarantee structure, this means the lender could potentially access the guarantor’s property (up to the guaranteed amount) to recover the shortfall.

In the most extreme scenario, this could mean the guarantor needs to sell their property to cover the debt. It’s a real, serious risk, not theoretical.

That said, several factors work in the guarantor’s favour in practice:

You still need to service the loan and demonstrate serviceability to the lender, so in most cases, buyers who get approved are in a position to make repayments
Limited guarantees cap the exposure to a specific amount rather than the whole loan
Property values generally trend upward over time, meaning your equity typically builds, reducing the time the guarantee needs to be in place
Most lenders require the guarantor to receive independent legal and financial advice before signing, which means there’s a formal process to ensure the guarantor truly understands what they’re agreeing to

How Long Does the Guarantee Stay in Place?

The guarantee is not permanent. It can be released once you’ve built enough equity in your own property, typically once your LVR has dropped to 80% (meaning you have 20% equity in your home).

This can happen through:

Your property increasing in value over time
You making regular repayments (reducing your loan balance)
A combination of both

Once you reach that threshold, you can request the lender release the guarantee. The guarantor is then completely free, no further obligation attached to their property.

How quickly this happens depends on your purchase price, your loan repayments, and what happens to property values in your area. In strong markets, some buyers have their guarantor released within a few years.

What Lenders Look For in a Guarantor Loan Application

Even with a guarantor, you still need to demonstrate to the lender that you can afford the loan. The lender will assess:

Your income and employment stability
Your existing debts and liabilities
Your credit history
Your living expenses and financial commitments

The guarantee reduces the security risk for the lender but it doesn’t replace the income and serviceability assessment. You still need to be able to service the repayments on your income.

Some lenders also still want to see genuine savings, not because you need them for a deposit, but to demonstrate that you have the financial discipline to save consistently. The threshold and definition of ‘genuine savings’ varies by lender.

Genuine Savings: What Does That Mean?

Some lenders require evidence of ‘genuine savings’ even for guarantor loans, typically 5% of the purchase price held in a savings account for a minimum of 3 months.

Not all lenders apply this requirement, and there are lenders who will approve guarantor loans without it. Your broker can identify which lenders are most appropriate for your savings history.

Do I Still Need to Pay Stamp Duty?

Yes — a guarantor loan helps with the deposit and LMI side of things, but it doesn’t remove the requirement for stamp duty or other upfront costs. However, as a first home buyer in NSW, you may be eligible for stamp duty exemptions or concessions that significantly reduce this cost.

Even with a guarantor loan requiring no cash deposit, you’ll generally still need some funds for:

Stamp duty (or some portion of it, depending on eligibility)
Legal and conveyancing fees
Building and pest inspection
Any other settlement costs

Depending on your stamp duty eligibility, this could be as little as $0, even with no deposit. Check your eligibility and property price caps here.

Some lenders will also allow you to borrow up to 107% of the purchase price, meaning these other costs could potentially be capitalised into the loan amount and you wouldn’t have to pay them upfront.

Guarantor Loan vs 5% Deposit Scheme: Which Is Better?

Both are strong options for first home buyers. The right one depends on your situation:

If you have family support and want maximum price flexibility: a guarantor loan may be better
If you’ve saved 5% and don’t want to involve family: the 5% Deposit Scheme could suit you well
If the property you want is above the government scheme’s price caps: a guarantor loan has no such caps
If no family member is able or willing to guarantee: you’ll need to explore other options

→ See our full comparison: 5% Deposit Scheme vs Guarantor Loan — Which Is Better?

Having the Family Conversation

One thing that doesn’t get talked about enough: the conversation you need to have with your family before pursuing this route.

A guarantor loan is a significant commitment for a parent or family member. Before any application is submitted, there should be a clear, honest conversation about:

What the guarantee means and what it commits them to
What happens if you lose your job, break up with a partner, or face financial hardship
What the plan is for having the guarantor released as soon as possible
Whether this is something both parties are genuinely comfortable with

Most lenders formalise this by requiring the guarantor to receive independent legal and financial advice before signing the guarantee. That’s a good thing, it ensures everyone involved is informed.

The Bottom Line

Buying a home with no cash deposit is possible in Australia, and for buyers with family support, a guarantor loan is a legitimate, well-established pathway to do it.

It’s not a loophole. It’s not a risk-free shortcut. It’s a structured arrangement between you, your family, and a lender. One that requires honest conversation, proper understanding, and careful setup. Done right, it can get you into the property market years earlier than saving from scratch would.

→ Ready to find out what your options actually look like? Book a free, no-obligation chat with the team at Evergreen Lending Group. We work with first home buyers across NSW every day — and we’re happy to talk through your situation before you’re ‘officially ready.’

→ Also read: How to Buy a House with a 5% Deposit in NSW (2026 Guide)

→ Also read: What is Lenders Mortgage Insurance (LMI) — And Is It Worth It?

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Credit eligibility criteria, terms, conditions, fees and charges apply. This article is for general informational purposes only and does not constitute financial or credit advice. Please speak with a qualified mortgage broker to understand what options may be available to you.

Evergreen Lending Group | Australian Credit Licence 486112 | Credit Representative 575199