Removing a Guarantor – How Refinancing Helps You Release Mum & Dad Safely

Removing a Guarantor – How Refinancing Helps You Release Mum & Dad Safely

Family guarantees help many Australians get into the property market sooner, but they’re not meant to last forever. Once you’ve built enough equity or reduced your loan balance, refinancing can help you remove the guarantor and finally take full ownership of your home loan.

This guide explains how guarantor removal works and what lenders look for when releasing the family guarantee.

1️⃣ What Is a Family Guarantee?

A family guarantee (or “parental guarantee”) is when:

• A parent or close family member uses their home’s equity to support your home loan.
• They guarantee a portion of your loan — often 20% of the purchase price.
• This helps you avoid LMI and buy sooner.

It’s a powerful tool for first-home buyers, but removing it is an important milestone.

2️⃣ When Can You Remove a Guarantor?

You can normally remove a guarantor when:

• Your loan balance drops below 80% of your property value.
• You’ve paid down enough of the loan.
• Your property has grown in value.
• You want full responsibility for the loan.
• Your guarantor wants to be released from the risk.

A valuation is usually the first step to confirm you’re eligible.

3️⃣ Why Refinancing Is the Easiest Way to Remove a Guarantee

While some lenders allow guarantor releases without switching, refinancing often gives you:

• A sharper interest rate.
• A fresh loan structure.
• Fewer hoops to jump through.
• Better lender serviceability options.

Refinancing resets your loan with no guarantee attached — clean and simple.

4️⃣ What Lenders Look For During a Guarantor Release

Lenders need to confirm you can support the loan independently.
They review:

• Your income and employment stability.
• Your repayment history.
• Your borrowing capacity without support.
• Your equity position (must usually be 20%+).

A strong track record helps your approval.

5️⃣ Step-by-Step: How Guarantor Removal Works

The process usually looks like this:

• 1. Order a valuation to confirm your property value.
• 2. Check that your LVR is at or below 80%.
• 3. Apply for a refinance with a lender who accepts standalone borrowers.
• 4. Pay out the old loan and remove the guarantee.
• 5. Start your new loan with no guarantor attached.

It’s generally straightforward — especially if your repayments have been clean.

6️⃣ What If Your Equity Isn’t Quite at 20%?

You still have options, including:

• Staying with your current lender until your value increases.
• Refinancing with LMI (less common, but possible).
• Consolidating small debts to improve borrowing power.
• Adding savings to reduce your loan balance below 80%.

A valuation might show you’re closer than you think.

7️⃣ Benefits of Removing a Guarantor

Releasing the guarantee gives everyone peace of mind:

• Your guarantor is no longer financially tied to your loan.
• You take full ownership of your home loan.
• You can refinance freely in the future.
• You unlock access to more lenders and better rates.

It’s a major milestone for any homeowner.

8️⃣ Risks & Things to Consider

There are a few things to keep in mind:

• Your rate or repayments may change after refinancing.
• You must demonstrate you can service the loan on your own.
• Your current lender may not offer a clean guarantor release.
• A market downturn can delay eligibility if property values drop.

Timing and strategy matter here.

9️⃣ Should You Refix or Restructure at the Same Time?

Guarantor removal is a great time to review:

• Your rate type (fixed, variable or split).
• Offset account needs.
• Debt consolidation if repayments are high.
• Equity release for renovations or upgrades.

You’re already refinancing — make the most of it.

🔟 The Smartest Way to Remove a Family Guarantee

A broker can help you:

• Order the right valuation to confirm eligibility.
• Find lenders offering smooth guarantor releases.
• Compare rates and features once you stand alone.
• Structure the loan for your next 5–10 years.