Reducing Risk as a Guarantor

The key risks to consider, how much of a risk they really are and what you can do to manage the risk

Many first-time buyers look towards their parents for help in getting a home loan. As a guarantor, you place your own home as security on the loan to help the buyer raise the money needed for a deposit. Naturally, this places you at risk if the borrower defaults on the loan. You’ll have to handle the payments if the borrower can’t. You also won’t receive any financial rewards for acting as a guarantor. Next, we are going to examine the main risks that guarantors face, and show you how you can manage them. How much can I borrow?Use UNO's calculator to estimate your borrowing capacity. Calculate Now

Risk #1 – Hurting Your Credit Report

The good news is that becoming a guarantor won’t have affect your credit report. As long as the borrower pays the home loan, you don’t need to worry about a thing. The problem starts if the borrower defaults. That’s when you need to start making payments on behalf of the borrower. If you’re unable to do this, it shows up on your credit report as a default on the loan.

Risk #2 – Problems with the Borrower

There’s a good reason why most guarantors are the borrower’s parents. If something sours the relationship between borrower and guarantor, issues with the home loan may appear. Again, the guarantor takes on the burden if this happens. Your relationship with the borrower may break down, especially if he or she defaults on the loan. Even so, you still have to make the repayments, else you may lose your house.

Risk #3 – Applying for Credit

Whenever you apply for credit, lenders look at the home loan you act as guarantor for. You don’t even have to be the one paying the loan. It’s still a liability on your credit report. This means that being a guarantor could prevent you from getting credit elsewhere.

Managing the Risks

Even with all these risks, many people become guarantors so they can help their family members. Fortunately, there are several things you can do to manage those risks.

Treat It as a Business Transaction

The personal relationship you have with the borrower should not be a factor when you become a guarantor. It’s important that you treat the loan as a business transaction, even when acting as guarantor for your own child. As such, speak to legal and real estate professionals before signing any contracts. They’ll tell you how much risk you face and will ensure you are capable of acting as a guarantor.

Consider Other Options

The borrower may think having you as a guarantor is their only option, but that isn’t always the case. For example, some lenders allow borrowers to use one-off gifts to cover the cost of the deposit. This allows you to help your family member without taking on a long-term risk. Speak to a home loan consultant to discover all your options.

Plan Ahead

It’s not just a breakdown in the relationship between borrower and guarantor that can give rise to issues. Accidents and unexpected incidents can cause serious issues, too. For example, the borrower may become ill or lose their job, making them unable to pay the mortgage. You’ll need to step up whenever something goes wrong. That makes planning ahead vital. Make sure you can actually afford the loan payments, just in case you find yourself having to deal with them.

What to do next

Those are the risks associated with becoming a guarantor. You must be absolutely certain that you can handle them before you sign a contract. Do the following before moving forward:

5 stars for our service reviews from clients

Book Call Now

UNO home loans

Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started
Considering a purchase or refinance?

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started
☎️ 🚫 No cold call promise

Related Articles

TESTIMONIALS

What our customers are saying

Justin Butcher
July 28, 2025
5 stars for our service reviews from clients
PROFESSIONALISM PLUS Jake was very helpful in helping us achieve our dream. He is a very professional and informative person who goes out of his way to help his clients through a stressful time whilst making the whole process seamless. On top of this he can also help get better Insurances and is happy to assist where he can. We would absolutely recommend choosing Jake to help you! Thanks for everything it was a pleasure dealing with you.
Read more
Aurora Tang
July 21, 2025
5 stars for our service reviews from clients
Had a fantastic experience with Paul. He was knowledgeable, responsive, and made the whole process smooth and stress-free. Highly recommended.
Read more
Just Abby
July 18, 2025
5 stars for our service reviews from clients
My dealings with Scott Wilkinson at UNO, have been nothing short of exemplary. My refinance involved a bunch of moving parts due to a business debt, and Scott didn't stop until we got an excellent result! Great communication, easy online portals for data collection and, from all accounts, a great team working together to get results for their clients. I really can't thank Scott enough, for going the extra mile(s) to make this happen for me. 10/10 would recommend his services to anyone looking at a restructure, and I won't hesitate to reach out again, should I be in the position in the future.
Read more
Matt Rose
July 11, 2025
5 stars for our service reviews from clients
We’re incredibly grateful to Mike Parsons for his outstanding support and expertise. Mike took the time to genuinely understand our unique situation and demonstrated a deep level of knowledge and insight throughout the process. His ability to assess our needs and apply tailored solutions made all the difference. Thanks to his thoughtful approach and professionalism, we were able to achieve an ideal outcome that perfectly suited our circumstances. We highly recommend Mike to anyone looking for a knowledgeable and client-focused professional who truly goes the extra mile.
Read more
Get About Guy
July 10, 2025
5 stars for our service reviews from clients
The UNO Home Loans team provided a great experience. I'm an expat Aussie living in the UK who was looking for an investment property back home in Australia. Mike and the team guided me through the whole process from giving me an initial indication of how much I could borrow, to finding me a lender with an appropriate loan that met my needs, and finally through the settlement process with the bank. The team were always available to answer my questions very promptly. The whole experience was very easy and hassle free.
Read more
Kylie Morgan
July 8, 2025
5 stars for our service reviews from clients
Scott and the team were amazing. The entire process was so simple and so fast! Thank you!
Read more
Gillian Kearon
July 6, 2025
5 stars for our service reviews from clients
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
Read more
John Carlo Penaflor
June 24, 2025
5 stars for our service reviews from clients
Amazing service from Scott. Efficient, clear and fast. Got my homeloan refinanced in record time.
Read more
Rebekah Tolmachoff
June 24, 2025
5 stars for our service reviews from clients
We had a fantastic experience working with Paul at Uno. From start to finish, he was professional, attentive, and genuinely cared about us and our situation. He kept in touch throughout the entire process, always keeping us informed and making everything feel simple and stress-free. Nothing was ever too much trouble, and his support made a big difference. Highly recommend Paul to anyone looking for a reliable and caring broker!
Read more
Sally MacKenzie
June 10, 2025
5 stars for our service reviews from clients
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
Dylan Aubrey
May 31, 2025
5 stars for our service reviews from clients
Jesse did a great job with helping me secure my loan, will be using him again in the future
Read more
Tom Deal
May 30, 2025
5 stars for our service reviews from clients
This is the second time I’ve worked with Mike Parsons, and I wouldn’t go anywhere else for mortgage advice. He’s extremely knowledgeable, responsive, and always happy to help. Mike takes a consultative approach, presenting clear options and making the whole process stress-free. Friendly, professional, and genuinely invested in getting the best outcome. Highly recommend and will definitely use him again!
Read more