Guarantor

A guarantor on a home loan (typically a parent or family member) is someone who provides a guarantee to a lender that they will be responsible for repaying the entire loan if the borrower can’t pay it back. The benefit for a borrower is that it may increase the amount they can borrow or prevent the borrower from needing to pay lenders mortgage insurance, however there are risks for the guarantor.

It’s important for guarantors and borrowers to understand their obligations before entering into a guarantor arrangement. If a borrower can’t repay the loan, then it could impact a guarantor’s credit and borrowing capacity or lead to repossession of the guarantor’s assets, and eventually cause family or relationship problems.