Yes, you can refinance a guarantor home loan in Australia. But refinancing does not automatically release the guarantor.
If you’ve had your loan for a few years, your position may have changed. Your property could be worth more, your loan balance could be lower, and your LVR could have improved enough to support the loan without the guarantor.
For example, you may have bought a home with a small deposit and your parents provided additional security. As your loan balance falls or your property value increases, you may eventually have enough equity to refinance without their support.
The question is no longer just whether you can refinance. It’s whether you can refinance and release the guarantor at the same time.
Can you Refinance a Guarantor Home Loan?
Yes. You can refinance a guarantor home loan while keeping the guarantee, or potentially refinance without it.
You might refinance for a lower rate, lower repayments or better loan features. If you’ve built enough equity, refinancing can also be an opportunity to review the guarantee.
Refinancing with a guarantor
You can switch lenders while keeping the guarantor, but the new lender may have different requirements.
A guarantor arrangement can also create a hidden refinancing constraint. If your parents’ guarantee is tied to your current lender, you may have fewer options when you want to switch banks. A new lender may not accept the same guarantee, leaving you to either find another lender that will or potentially pay LMI if you remove the guarantee while your LVR is still high.
Refinancing to remove the guarantor
This is a different goal. You are refinancing because your financial position may now be strong enough to support the loan yourself.
If your equity and LVR have improved, you may be able to release the guarantor while moving to a lender with a loan structure that better suits your needs.
When Can You Refinance Without a Guarantor?
There is no set point when a guarantor automatically comes off a home loan.
Generally, you need to show that your property and financial position are strong enough for a lender to accept the loan without the additional security. Your equity, LVR and ability to meet the lender’s serviceability requirements all matter.
Your property has gained equity
Equity is the difference between your property’s current value and your mortgage balance.
If your property has increased in value, your equity may have grown even if you haven’t made extra repayments. This can improve your LVR and potentially reduce your reliance on the guarantor.
The new lender may arrange its own valuation as part of the refinance.
Your loan balance has fallen
Your mortgage balance generally falls as you repay the principal.
A lower balance means more equity in your property. If your property has also increased in value, the change can be even greater.
If you’ve been making repayments for several years, it is worth checking whether your original guarantee is still necessary.
Your LVR has improved
LVR compares your loan balance with your property’s value. If you’re not sure where you stand, book a free loan review to get a clearer picture of whether you may be ready to release the guarantor.
An LVR of around 80% is generally the key target when looking to release a guarantor. However, reaching 80% does not automatically release the guarantee. The lender may still require a valuation and formal review.
If the guarantor is removed while the resulting LVR is still above a lender’s acceptable threshold, LMI may become relevant.
You can meet the new lender’s serviceability requirements
A guarantor provides additional security. They do not automatically solve an affordability problem.
The new lender will still look at your income, expenses, debts and credit history. It will also assess whether you can afford the refinanced loan. Having enough equity may solve the security issue. It does not necessarily solve the serviceability issue.
How to Refinance and Release the Guarantor
If your goal is to refinance and remove the guarantor, start by looking at your current position.
Don’t start with the lowest advertised rate. Start with your property value, loan balance and existing guarantee.
1. Review your current loan
Check your loan balance, interest rate and guarantee.
Find out what the guarantor currently guarantees. Also check whether your lender has specific release conditions.
2. Check your property value
Your property’s current value can change your refinancing position.
A higher valuation may mean more equity and a lower LVR. Ask whether the lender will accept an independent valuation or arrange its own.
3. Calculate your LVR
Compare your mortgage balance with your property’s current value.
This gives you a starting point for working out whether you may qualify without the guarantee.
4. Compare suitable lenders
Look beyond the interest rate.
Check each lender’s guarantor policy, valuation requirements, fees and release conditions. If you still need a guarantor, confirm that the new lender accepts the proposed structure.
5. Apply for refinancing
The new lender will assess your financial position.
This includes your income, expenses, debts and borrowing capacity.
6. Complete the required valuation
The lender may arrange its own property valuation.
This helps determine whether your property provides enough security for the proposed loan.
7. Request guarantor release
If the lender approves the new structure, complete its release process.
Don’t assume the guarantee will disappear automatically. Guarantor release is generally not automatic, so borrowers should be proactive rather than waiting for their lender to suggest it.
Once your valuation indicates you have reached a suitable LVR, ask for the guarantee to be reviewed.
8. Settle the refinanced loan
Once settlement is complete, confirm that the guarantee has been formally released.
Ask about guarantor release before you apply. This can help you avoid choosing a lender that cannot provide the outcome you want.
What Happens to the Guarantor When you Refinance?
Changing lenders does not automatically end the guarantee. If you still need additional security, the new lender may require a new guarantor arrangement.
If your equity has improved enough, you may qualify without the guarantee and have your guarantor formally discharged.
For the guarantor, the risk isn’t only potential repayment if the guarantee is called. Using their property or equity as security can also reduce their borrowing flexibility. Falling property values can also increase the borrower’s LVR, potentially making it harder to release the guarantor.
Parents should therefore consider both the potential financial liability and the opportunity cost before remaining guarantors.
The key question is:
When and how will my liability end?
Get a clear answer before agreeing to a new loan structure.
Could Refinancing Trigger LMI?
Potentially, yes.
If removing the guarantor leaves your LVR high enough, the new lender may require LMI.
Property value → Loan balance → LVR → Security → Potential LMI
For example, a $700,000 property with a $600,000 loan has an LVR of about 86%. Removing the guarantor could therefore make LMI relevant, depending on the lender and loan structure.
Around 80% LVR is an important benchmark, but it does not automatically release the guarantor. Check the potential LMI cost before requesting release.
Why are Guarantors usually Released Around 80% LVR?
Removing a guarantor before you have enough equity can leave you with a high LVR and potentially an LMI cost. For that reason, there is usually little benefit in rushing to remove the guarantee while the property still needs the additional security.
In many cases, the practical approach is to keep making repayments and wait until the loan reaches a suitable LVR, often around 80%, then proactively request a valuation and guarantor release.
Earlier removal may still be necessary in some circumstances, but it can be more difficult and costly. If the guarantee cannot be removed without creating an unacceptable lending position, it’s worth speaking with a specialist about what options are realistic for your circumstances.
The important point is not to wait for the bank to raise the issue. Once your LVR reaches a suitable level, ask for a valuation and review the guarantee.
What if you Renovate to Increase your Property Value?
Renovating may improve your valuation, but it is not a guaranteed shortcut to guarantor release.
You could spend $40,000 on renovations without adding $40,000 to the property’s value. Market conditions, comparable sales and the quality of the work all affect the valuation.
If you’re renovating to reduce your LVR, weigh the cost against the potential increase in value first.
Example: refinancing after building enough equity
Say a borrower bought a $700,000 home with a $35,000 deposit, with their parents providing additional security because the deposit was relatively small.
Several years later, after continued repayments, the property is worth $840,000 and the loan balance has fallen to $620,000.
The current LVR is about 74%.
This position is very different from when the loan first started. There may now be enough equity to refinance without the parents’ guarantee.
This does not mean the guarantee will automatically be released. The lender will still assess the application and property valuation.
If your own numbers have improved, it may be worth requesting a valuation and guarantee review rather than assuming the lender will contact you first.
What if you still need a guarantor?
You don’t have to remove the guarantor to refinance.
If your LVR is still too high, you may be able to compare suitable lenders that accept guarantor arrangements.
This could still make sense if your current loan is no longer competitive. You might want a lower rate, better features or a lender that suits your circumstances better.
But remember that keeping the guarantor can limit your lender choices. If the guarantee is linked to your parents’ lender, moving to a separate lender may mean finding another lender willing to accept the same arrangement or paying LMI if the guarantee is removed while your LVR remains high.
Compare the potential benefit of refinancing against the cost and flexibility of keeping the guarantee.
Guarantor Loan vs the 5% Deposit Scheme
A guarantor loan isn’t the only way to buy with a small deposit. Some first-home buyers use the Australian Government 5% Deposit Scheme instead, which doesn’t require family to provide security.
The trade-off is flexibility. A guarantor loan can involve greater family financial risk, but it generally comes with fewer restrictions on how the property is used later. The 5% Deposit Scheme removes that family risk but carries scheme-specific conditions, including an ongoing requirement to live in the property as an owner-occupier while the Government guarantee is active. If you move out or want to turn the property into an investment, the guarantee may no longer apply and your lender may require you to pay LMI or other costs.
This article focuses on refinancing an existing guarantor loan. If you’re weighing up which path suits a first-home purchase, that’s a separate conversation worth having with a specialist.
What to check before refinancing a guarantor home loan
A lower interest rate can look attractive. But the rate is only one part of the decision.
Your current interest rate
Know what you’re paying before comparing alternatives.
Refinancing and break costs
Check whether leaving your current loan creates costs.
Discharge and new loan fees
Check existing discharge fees, application costs, valuation fees and ongoing loan fees.
Current property valuation
Your property value affects your available equity and LVR.
LMI implications
Ask whether removing the guarantee could trigger LMI.
New lender’s guarantor policy
Confirm that your proposed structure is accepted.
Guarantee-release requirements
Ask exactly what the lender requires for release and when you can request it.
Loan features
Compare offset, redraw and repayment flexibility.
A lower rate does not automatically mean a better refinance. Costs, features and guarantee conditions can change the overall value.
Should you refinance or focus on releasing the guarantor first?
Start with the outcome you want.
Want a lower rate? Compare refinance options.
Have enough equity? Ask about releasing the guarantor.
Still have a high LVR? Check lenders that accept guarantor arrangements and the potential LMI cost.
Start with three numbers:
Property value. Loan balance. Current LVR.
These can help you understand your refinancing and guarantor-release options.
FAQs
Does the guarantor need to sign the refinance?
It depends on the refinance structure. If the new loan still relies on the guarantor, they may need to provide documents or sign new documents. If the guarantee is released, the lender must formally discharge the relevant guarantee or security.
How long does it take to release a guarantor?
There is no standard timeframe. The lender may need a valuation, financial assessment and formal release request. Release is generally not automatic, so you may need to ask your lender to review your position.
Can I refinance if I still have a low deposit?
Yes, potentially. A low deposit can make refinancing harder if your LVR remains high. You may need a lender that accepts your guarantor arrangement. A guarantor can support security requirements but does not automatically solve serviceability.
Does a guarantor increase borrowing capacity?
A guarantor primarily provides additional security. They do not automatically increase your borrowing capacity. The lender still assesses your income, expenses, debts and ability to repay the loan.
Explore your Refinancing Options
Your financial position may look very different from when you first took out your guarantor home loan.
Maybe your property is worth more. Maybe you’ve paid down a significant part of the mortgage. Maybe your LVR has improved.
Your guarantor may not need to remain part of the loan structure indefinitely.
Refinance can help you compare your current loan with suitable alternatives. You can also explore whether releasing the guarantor is realistic for your position.
Thinking about refinancing? Start by understanding what your current loan is worth, then request a refinance callback to discuss your options.
Aidan Hartley is a Credit Representative (Credit Representative Number 523823) of Mortgage Specialists Pty Ltd trading as Specialist Finance Group, Australian Credit Licence 387025.
The information provided on this website and in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider its appropriateness to your circumstances and, where necessary, seek independent financial or legal advice. Refinance.com.au does not guarantee any specific loan outcome, interest rate, or savings figure, and all examples provided are illustrative unless otherwise stated as an actual client outcome.
