Guarantor loans are fantastic for families where the parents have adult children who live in expensive cities and want to buy a home. They have stable employment and have saved some money but not enough to buy a home without paying mortgage insurance. The children can borrow the deposit plus costs ( usually 20% plus stamp duty and loan costs if there are any) against their parents property and 80% against their place. So they can borrow over 100% of the loan costs and not pay mortgage insurance.

The various banks have different versions of this loan but overall this is how it works.

The child pays the loan and can apply to have the parents property released as a guarantor once the loan has been payed down to 80% loan to value ratio( the loan divided by the property value) or if the property goes up so the loan is 80% of their property value. In certain cases the loan only need to go to 85%.

We have had quite a few adult children reach this by buying a property and renovating it and then getting it revalued and having the parents released straight away. Although this method should be veiwed with caution as any loan would be at a high loan to value ratio.