Guarantor loans: pros, cons and who qualifies

Guarantor loans have surfaced as a practical route for some first-home buyers in Bendigo who lack a full deposit but have access to family equity.

The option gains relevance now because Melbourne auction clearance rates head toward their weakest levels since the Covid period, while affordability pressures reported across Victoria and South Australia spill into regional centres where median prices sit near $490,000.

Buyers in Flora Hill and Strathdale, popular with Melbourne commuters and remote workers, have started asking local lenders about these arrangements, with some exploring support through Bendigo and Adelaide Bank branches on View Street and community programs run from the Bendigo Regional Institute of TAFE.

Recent market data from realestate.com.au shows price records set in outer Melbourne suburbs such as Templestowe and Donvale, underscoring how even modest regional price growth can stretch first-home budgets without additional security.

Pros and cons for local buyers

A guarantor arrangement can let buyers enter the market with a deposit as low as 5 per cent while avoiding lenders mortgage insurance in many cases. The guarantor’s existing property equity stands behind the loan until the borrower builds enough equity to release them. On the downside, the guarantor’s own borrowing capacity shrinks for the duration of the guarantee, and any default places their home at risk. Interest rates on these loans also remain tied to the borrower’s credit profile rather than the guarantor’s stronger position.

Who qualifies in the current market

Applicants typically need a close family member with sufficient equity in an unencumbered or low-loan property, stable income to service the full loan amount, and a purchase price that fits within lender valuation rules. In practice this often means parents or grandparents whose homes in established Bendigo streets have appreciated over the past decade. Prospective buyers should book an appointment with a mortgage broker accredited by the bank and obtain independent legal advice before signing any guarantee documents. Checking eligibility for the Victorian First Home Owner Grant alongside the loan structure remains a standard next step at local conveyancing firms.

This article is general information only and is not personal financial or investment advice. Consider your own circumstances and seek licensed professional advice before making financial decisions.