Key takeaways
- A joint home loan combines incomes, but every borrower is liable for the whole debt.
- A family guarantee uses a relative’s property as extra security, which can mean a smaller deposit and no LMI, but puts their home at risk.
- A gifted deposit keeps parents off the loan and title; lenders will want proof it doesn’t have to be repaid.
- Parents can release equity from their own home, but the new debt is theirs.
- Check government schemes first: the 5% Deposit Scheme, the 2% deposit option for single parents and Help to Buy.
When family wants to help you buy, the big question isn’t only who owns the home. It’s how the purchase is financed, and who carries the risk if something goes wrong. Here are the main financing options for family property purchases in NSW, how lenders treat each one and what to weigh up.
Family financing options at a glance
| Option | Who borrows | Who carries the risk | Often suits |
|---|---|---|---|
| Joint home loan | Everyone on the loan | All borrowers, for the full debt | Relatives buying and owning together |
| Family guarantee | You | You, plus the guarantor up to the guaranteed amount | Buyers with good income but a small deposit |
| Gifted deposit | You | You (the gift is spent) | Families with spare savings |
| Equity release | Your parents, on their own home | Your parents | Parents with equity and income to spare |
| Government schemes | You, alone or with one other eligible person | You | Eligible first home buyers and single parents |
Joint home loans: borrowing together
A joint loan puts two or more people on one home loan. The lender adds up everyone’s income, debts and expenses, so together you may be able to borrow more than either of you could alone.
The trade-off is liability. Each borrower is responsible for the whole loan, so if one person stops paying, the others must pay the full amount. The loan also counts against each borrower when they apply for credit later.
Joint loans suit relatives who are also buying the property together. Ownership shares, costs and exit plans belong in a co-ownership agreement: see our guide to buying property with family members.
Family guarantees (family pledge loans)
With a family guarantee, a relative, usually a parent, offers their own property as extra security for your loan. They don’t own part of your home and they aren’t a borrower. Often the guarantee covers only part of the loan, such as the gap between your deposit and 20% of the price. That can let you buy with a smaller deposit and may avoid lenders mortgage insurance.
Example: a limited guarantee
For example, you buy a $900,000 home with a $45,000 deposit (5%) and need to borrow $855,000. A loan at 80% of the price would be $720,000, so a limited guarantee of $135,000, secured on your parents’ home, covers the gap. This ignores duty and other costs, and lender policies vary.
Moneysmart spells out the risks for the guarantor:
- they may have to repay the guaranteed debt, plus interest, if you can’t
- the lender may sell the property they used as security
- a default can go on their credit report, and the guarantee can stop them borrowing
- it can strain the relationship if things go wrong.
Guarantors should get independent legal and financial advice before signing. The guarantee can often be released later, after you’ve paid down the loan or the property has grown in value.
Gifted deposits
A cash gift is the simplest help: parents give money towards your deposit and stay off the loan and the title. Lenders will usually want evidence that it’s a genuine gift, such as a signed gift letter and bank statements showing where the money came from. Some also want to see your own savings history.
Which option fits your family?
Phillip compares how different lenders treat guarantees, gifts and joint loans, free and with no obligation.
Releasing equity from your parents’ home
Parents with equity in their home can borrow against it, through a top-up or a new loan, and give or lend the money to you. Unlike a guarantee, the new debt is theirs.
- They must qualify for the extra borrowing, and the lender will ask how they’ll repay it, including into retirement.
- It adds interest and repayments to their budget.
- Their home secures the loan.
It can suit parents with plenty of equity and income who want a clean separation from your loan. Close to retirement it’s a big step, so they should get their own financial advice.
Government schemes that can replace family help
Sometimes the best option doesn’t need family money at all. Check these first.
Australian Government 5% Deposit Scheme
Eligible first home buyers can buy with a 5% deposit and no lenders mortgage insurance, because the Government guarantees part of the loan. Since 1 October 2025 there are no income caps and no limit on places. In NSW the price cap is $1.5 million in Sydney and the regional centres, and $800,000 elsewhere. You can apply alone or with one other person, such as a partner, friend or relative, if both of you meet the criteria.
Family Home Guarantee for single parents
Single parents and single legal guardians of at least one dependent child can buy with a 2% deposit and no LMI. You don’t have to be a first home buyer, but you can’t own other property once the new home settles, and you must apply on your own.
Help to Buy
Help to Buy is a shared equity scheme. With a 2% deposit, the Government can contribute up to 30% of the price of an existing home or 40% of a new one, and shares in any gain or loss when you sell or buy back its share. Taxable income must be at or below $103,000 for individuals, or $165,000 for single parents and joint applicants. All applicants must be Australian citizens, and there are 10,000 places a year.
NSW first home buyers may also pay no transfer duty, or less, even when a relative buys a share as an equity partner. Our First Home Guarantee guide and first home buyer page cover the details.
How to choose the right option
Start with your own numbers
Use our borrowing power calculator to see what you could borrow on your own.
Check the schemes
If you’re eligible for a government scheme, you may not need a guarantor at all.
Compare family options by risk
Ask who is exposed, for how much, for how long, and how they get out.
Get advice for everyone
Guarantors and co-owners need independent legal advice; an accountant can check the tax side.
Compare lenders
Lender policies on guarantees, gifts and joint borrowers differ, so the right lender matters.
Frequently asked questions
Often, yes. What matters is how much equity they have after their own loan, because the guarantee is secured against it. The lender will value their property and may limit the guarantee to that equity. Your parents should get independent legal and financial advice before they sign, and understand they could have to pay.
It can. When the guarantee covers the gap between your deposit and 20% of the property’s value, lenders can treat the loan as if you had a 20% deposit, so LMI may not apply. Lenders differ on the maximum loan, which properties qualify and whose property they accept as security.
No. It’s for single parents and single legal guardians of at least one dependent child, and you don’t need to be a first home buyer. You can’t own any other property once your new home settles, you must apply on your own and the home must be under the price cap. The minimum deposit is 2%.
Yes. As first home buyers you can apply on your own or jointly with one other person, including a family member, but both of you must meet the eligibility criteria. That means neither of you can have owned property in Australia in the last 10 years, and the home must be under the price cap for its location.
Usually. Once you’ve paid the loan down, or the property has grown in value, you can ask the lender to release the guarantee. Expect a new valuation and a fresh look at your finances. Refinancing to a lender that doesn’t need the guarantee is another way to end it.
Sources
- Moneysmart: Going guarantor on a loan (opens in a new tab)
- Moneysmart: Ways to buy a home sooner (opens in a new tab)
- Housing Australia: Australian Government 5% Deposit Scheme for first home buyers (opens in a new tab)
- Housing Australia: 5% Deposit Scheme for single parents and legal guardians (opens in a new tab)
- Housing Australia: Property price caps (opens in a new tab)
- Housing Australia: Australian Government Help to Buy Scheme (opens in a new tab)
This article is general information only and doesn't take your objectives, financial situation or needs into account. Figures and eligibility rules change; check the official sources above or talk to us before you act. Keystone Home Loans Pty Ltd ATF BEMA Family Trust, Credit Representative Number 564704 is authorised under Australian Credit Licence Number 384704.
Written by
Phillip Bui
Founder and Principal Mortgage Broker at Keystone Home Loans, based in Arncliffe, NSW. Accredited Mortgage Broker and Full Member of the Mortgage & Finance Association of Australia (MFAA).
