Can I Use a Guarantor Loan to Buy an Investment Property First?
Guarantor loans aren't legally limited to owner-occupied homes, but lender policy on investment purchases varies — and grants are usually forfeited.
Can I use a guarantor loan to buy an investment property first?
A guarantor arrangement itself isn’t restricted by law to owner-occupied purchases. A family member’s equity can, in principle, stand behind any home loan, including one for a property you intend to rent out rather than live in yourself. Whether a particular lender will actually structure it that way is a separate question — that’s set by the lender’s own credit policy, and policy varies from one lender to the next.
What’s clearer is the trade-off on the other side. Buying an investment property as your first purchase — guarantor-backed or not — generally forfeits the first home buyer grants and the federal deposit schemes, because those are built around living in the property yourself.
What is a guarantor home loan, and how does it work?
A guarantor home loan is one where a family member — most often a parent — offers equity in their own property as additional security. That extra security closes some or all of the gap between your savings and the deposit a lender wants, without any cash changing hands. For the full mechanics — how the guarantee is structured, what the guarantor is actually risking, and how it’s eventually released — see our guide to guarantor home loans.
One reason guarantor loans are common among first home buyers: reducing the effective loan-to-value ratio (LVR) a lender is exposed to is also one of the ways buyers avoid lenders mortgage insurance (LMI). LMI is usually payable when the amount borrowed exceeds 80% of the property’s value, and it protects the lender — not the borrower or the guarantor. That mechanic doesn’t change depending on what the security property is used for.
Does it matter whether the property is one you’ll live in or one you’ll rent out?
Conceptually, no. A guarantee is security over a loan, and a loan doesn’t stop being a loan because the security property is rented out rather than lived in. In practice, guarantor policies at most lenders were built with an owner-occupied first home buyer in mind, and individual lenders may apply different conditions — or decline the structure altogether — for an investment purchase.
That’s the kind of detail that differs by institution and can change without much public notice, so it isn’t something this article can settle in general terms.
What do you give up by buying an investment property first?
This part is well established, and it applies whether or not a guarantor is involved. As at July 2026, the Australian Government’s 5% Deposit Scheme (the current form of the Home Guarantee Scheme) is only available to buyers who will occupy the property: its eligibility criteria require the applicant to be a first home buyer or not have owned property in the past 10 years, and to be an owner-occupier, alongside citizenship or residency, age and price-cap conditions.
First Home Owner Grants work the same way. Every state and territory that still pays a grant ties it to a residence requirement — moving in and living there as your principal place of residence for a set period, commonly six or twelve months depending on the state. An investment purchase doesn’t meet that test, so it doesn’t attract the grant.
Put together: a first-purchase investment strategy — with or without a guarantor — steps around the deposit and grant support built for people buying a home to live in. That’s not a reason to rule it out; it’s a cost worth weighing before committing to the strategy. For what each state’s grant actually pays, see our guide to first home buyer grants across Australia, and for the deposit scheme’s full eligibility list, see do you qualify for the Home Guarantee Scheme.
What else is worth weighing before using a guarantor loan on an investment property?
A few factors sit alongside the grant question, and none of them point to a single right answer for every buyer:
| Factor | What it means here |
|---|---|
| Guarantor’s exposure | Their property is at risk either way |
| Tax treatment | Rental income is assessable; a sale attracts CGT |
| Grant and scheme access | Forfeited for this purchase, guarantor or not |
| LMI | Generally still avoidable, if the lender permits it |
The tax point is the one first-time investors most often underestimate: an investment property is taxed differently from a home you live in from day one, not only on eventual sale. Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
Where do you take this from here?
Whether a specific lender will support a guarantor arrangement for an investment purchase, and on what terms, isn’t published in one place — it sits inside each lender’s own credit policy and can change over time. A licensed mortgage broker can check current lender positions against your circumstances and the guarantor’s, and can model how the grant and scheme trade-offs above apply to your numbers specifically. If you’re also weighing how much deposit you’d need either way, see our guide to how much deposit you really need for a first home.
