Understanding home loans · Guide 03
Guarantor support
vs a gifted deposit.
A guarantor and a gifted deposit can both help with a purchase. They carry different responsibilities for everyone involved.
Guarantor support vs a gifted deposit
Additional security.
Or additional cash.
Family guarantee
A guarantor offers security for an agreed obligation. If the borrower cannot pay, the guarantor may become responsible under the guarantee. Their property may be at risk.
Genuine cash gift
A genuine gift contributes cash with no expectation of repayment. If the money must be repaid, describe it as a loan and disclose it to the lender.
The practical differences
| The question | Family guarantee | Genuine cash gift |
|---|---|---|
| What is being provided? | Additional security, subject to lender terms. | Cash towards the purchase. |
| Does it reduce the loan amount? | The guarantee itself does not supply cash or repay the loan. | A gift used towards the price can reduce the amount borrowed. |
| What does the family member risk? | Liability under the guarantee and any asset offered as security. | Giving up the gifted money and its future use. |
| What evidence is needed? | The lender assesses the guarantor and security. | The lender may request gift confirmation and evidence of the funds. |
| How does it end? | Release needs lender agreement and its conditions must be met. | A genuine gift has no repayment obligation. |
Before anyone commits
A family conversation.
With clear boundaries.
Use a hypothetical $700,000 purchase to separate the ideas. With $70,000 of buyer cash, the price-only funding gap is $630,000. A $70,000 gift used towards the price reduces that gap to $560,000.
A guarantee with no cash gift leaves the same $630,000 funding gap. It supports security rather than replacing the money borrowed.
Discuss the arrangement independently. Clarify expectations and get legal advice before signing a guarantee. The family member should understand their exposure, future borrowing implications and the release process.
A few useful answers
Questions worth asking.
Does having a guarantor guarantee approval?
No. The lender still assesses the borrower, security and its lending criteria.
Can the guarantor simply withdraw later?
Do not assume so. Release requires the lender to agree under the applicable conditions.
What if my family expects the gift back?
Then disclose that expectation. A repayable arrangement is different from a genuine gift and may affect the assessment.
Keep exploring
Clarity, one choice at a time.
Your next step
A little clarity.
A better conversation.
Bring your questions. We can talk through the numbers, features and considerations that matter in your situation.
Sources & further reading
Read the underlying guidance and check the current terms of any loan you are considering.
- ASIC MoneySmart: going guarantor on a loan (opens in a new tab) ↗
- Westpac: family security guarantee, a lender-specific example (opens in a new tab) ↗
General educational information only. It does not consider your personal objectives, financial situation or needs. Examples are hypothetical, are not loan offers and do not assess eligibility. Lender criteria, product terms, fees and charges apply. Seek appropriate advice for your circumstances.