Can I Use Equity in My Parents' House as My Home Deposit?
A family guarantee lets a parent's equity secure part of your loan — but it puts their property at risk. How it works, and what to ask first.
Can I use equity in my parents’ house as my home deposit?
Yes — but not directly, and not without your parents taking on real risk. You can’t literally convert the equity in their home into cash for your deposit. What you can do is ask them to become a guarantor: they offer part of the equity in their own property as extra security for part of your loan, sitting alongside whatever deposit you bring yourself.
That’s a real commitment on their part, not a paperwork formality. If your loan falls behind and can’t be recovered from you, a lender can call on the guaranteed portion of your parents’ equity — and in the worst case, that puts their home on the line. The rest of this article sets out how the arrangement works, what it asks of your parents, and where its limits are — not whether your family should use one.
What does the guarantor actually risk?
This is the part to be clear-eyed about before anyone signs anything. A guarantor isn’t a reference or a co-signer on paperwork. Under a family guarantee, they become contractually liable for the guaranteed portion of your debt, and their own property is what secures that liability.
In practice, that means: if repayments stop and the lender can’t recover what’s owed from you or the property being purchased, it can pursue your guarantor for the guaranteed amount. That’s not the whole of your loan — only the portion their equity stands behind — but it is a real, not theoretical, consequence. It’s also why guarantors are consistently pointed toward their own legal and financial advice before agreeing, separate from any advice you get as the borrower, because your interests and theirs aren’t the same in this arrangement.
What exactly is a family guarantee?
A family guarantee (sometimes called a family pledge or limited guarantee) lets a family member offer equity in their own property as additional security for part of your home loan — without handing over any cash. You remain the borrower and the one responsible for repaying the loan; your guarantor’s role is limited to the security they’ve offered, for the portion the lender has agreed to.
Nothing about the guarantor’s own ownership changes at the outset. They keep their property and their existing mortgage arrangements exactly as they were; what changes is that their equity is now also standing behind part of your debt, on paper, until the guarantee is released.
Is a family guarantee the same as a cash gift?
No — they’re different arrangements with different consequences, even though both involve family helping with a deposit shortfall. A cash gift hands over money that becomes yours outright; a lender may then ask how long it’s been sitting in your account before counting it toward your deposit. A guarantee doesn’t move any money at all.
| Family guarantee | Cash gift | |
|---|---|---|
| What moves | No money changes hands | Money transfers to you outright |
| Ongoing exposure for the giver | Liable until released | None, once given |
| What a lender typically asks | Its own security terms | How long funds have been held |
Because a guarantee and a gift are often discussed in the same breath — both are ways family can help — it’s worth being clear they carry very different risk for the person helping you. A gift’s downside is limited to the amount given; a guarantee’s downside, in the worst case, is the guarantor’s own home.
How does a guarantee change what a lender assesses?
A guarantee changes the security behind your loan — it doesn’t change a lender’s obligation to check that you, personally, can afford it. Under ASIC’s responsible lending framework (Regulatory Guide 209), a lender must still make reasonable inquiries into your financial situation and assess whether you can meet your own repayments without substantial hardship, regardless of what security stands behind the loan. A guarantor doesn’t let you borrow more than you could otherwise service; it changes what happens if things go wrong, not whether the lender checks your capacity going in.
Where a guarantee more directly changes the numbers is around lenders mortgage insurance (LMI). Lenders usually require LMI once a loan is above 80% of the property’s value — the point at which the loan-to-value ratio (LVR, your loan as a percentage of the lender-assessed value) crosses that threshold. Offering a guarantor’s equity as extra security is one way a lender may treat the effective, lender-assessed position on the guaranteed portion as sitting at or below that 80% mark, which is one reason some borrowers use a guarantee instead of paying LMI.
Exactly how much of your loan needs to be guaranteed to achieve that — the size of the guaranteed portion itself — is set by each lender’s own policy, not a published industry figure.
Whether a guarantee also changes how much of your own deposit needs to be “genuine savings” — money you’ve built up yourself, rather than a lump sum that just landed in your account — is a separate, lender-specific question again. Our guide to what counts as genuine savings covers how that’s typically assessed; a guarantee doesn’t automatically remove that expectation.
Who can be a guarantor?
This article uses “parent” throughout because that’s how the question is usually asked, but a family guarantee isn’t necessarily limited to parents. Which family members a lender will accept, and what age or other eligibility conditions apply, is set by each lender’s own criteria rather than one rule that applies across the market.
If you’re considering this with someone other than a parent, that’s a conversation to have directly with a lender or broker rather than assume either way.
How is a guarantor released from the arrangement?
A family guarantee isn’t usually meant to be permanent. Lenders typically allow a guarantor to be released once certain conditions are met — commonly discussed in terms of the loan balance falling far enough, relative to the property’s value, that the lender no longer needs the extra security. The specific threshold, and any other conditions such as a minimum time held or updated proof of your ability to service the loan alone, are set by each lender’s own policy.
Until release happens, the guarantor’s exposure continues. Refinancing, selling, or a change in the property’s value can all affect the timing, and none of it happens automatically just because time has passed.
Are there other ways to buy without your parents’ equity?
A family guarantee is one option, not the only one. Two others worth knowing about on their own terms, rather than as fallbacks:
- Saving your own deposit. How much of it needs to be “genuine savings”, and over what timeframe, varies by lender — our guide to what counts as genuine savings covers what’s commonly weighed, and our guide to how much deposit you need to buy a first home covers the overall target.
- The Australian Government’s 5% Deposit Scheme (the Home Guarantee Scheme). Since its expansion on 1 October 2025, eligible first home buyers can buy with a government-backed guarantee in place of a family one, subject to price caps and its own eligibility rules. Our guide to buying with a 5% deposit sets out how that scheme works.
Neither path removes a lender’s own serviceability assessment, and neither is a straight substitute for the other — they’re separate mechanisms with separate conditions.
What should a family weigh up before agreeing to a guarantee?
There’s no single right answer here, and this article isn’t the place to find one — what matters is that everyone involved is looking at the same picture before agreeing to anything. Some of what’s commonly weighed on each side:
- For the borrower — whether a guarantee gets you into the market sooner, and what it asks of your parents in exchange.
- For the guarantor — what portion of their equity is exposed, for how long, and what conditions apply before it’s released.
- For both — whether independent legal and financial advice has been obtained separately for each of you, given your interests in the arrangement aren’t identical.
- For both — what happens under a range of outcomes, not only the one everyone expects and hopes for.
None of this is a reason to rule a family guarantee in or out. It’s the set of questions worth having clear answers to before anyone commits.
Where can you get help working through this?
A licensed mortgage broker can explain how different lenders structure and price a family guarantee, including how release conditions typically work in practice. A solicitor or conveyancer can review the guarantee documents your parents would be signing, and confirm they’ve had the chance to get independent advice before doing so. Given what’s genuinely at stake for your parents, this is a decision that benefits from professional advice on both sides of the arrangement, not just yours.
