Written by

Steven Lee

Mortgage Director, ODIN Mortgage & Tax

10+ years in Australian banking and mortgage lending

Last reviewed

Updated on: October 13, 2026 View profile →

For Australian expats applying for a home loan from overseas, a guarantor arrangement can resolve two of the most common barriers in one move: a limited deposit and a lender’s scepticism about foreign income. A guarantor, typically a parent or close family member in Australia, uses equity in their own property as additional security for your loan. This does not mean they make your repayments. It means their property backstops your borrowing, which can help reduce your loan-to-value ratio (LVR) and improve your overall application in the eyes of the lender. For expats dealing with income shading, currency conversion, and distance from the Australian market, this structural tool is one of the most practical levers available.

What Is a Guarantor Arrangement and How Does It Work for Expat Borrowers?

A guarantor arrangement is a formal lending structure in which a third party, usually a family member, offers their property as additional security for someone else’s home loan. The guarantor does not co-own the property being purchased, and they are not responsible for regular repayments. Their liability is limited to the security they have offered, and that liability can be released once the borrower’s equity or LVR reaches a threshold agreed upon with the lender.

For expats specifically, this structure addresses a challenge that goes beyond the deposit. Lenders typically shade foreign income, meaning they apply a reduction to your declared overseas earnings when calculating how much you can borrow. A guarantor arrangement can offset the effect of that shading by improving the security position of the loan, making the application more acceptable to a lender even where borrowing capacity has been reduced by currency or income adjustments.

Why Do Australian Lenders Treat Expat Applications Differently?

Building on that income shading point, the broader issue is that Australian lenders apply additional scrutiny to borrowers who earn income overseas, and not all lenders apply the same policies. The core concerns from a lender’s perspective include:

• Currency risk: Overseas income is paid in a foreign currency. Lenders typically apply a shading rate to account for exchange rate volatility. The discount applied varies by lender and by currency.
• Income verification: Acceptable documents differ by country of residence and employment type. Some lenders require locally-certified payslips; others accept foreign tax returns or employer letters.
• Residency status: Lenders distinguish between Australian citizens living overseas and permanent residents, and between those who intend to return and those who do not. This affects which products are available.
• LVR constraints: Many lenders apply tighter LVR limits for non-resident borrowers. These limits depend on individual lender policy and borrower profile and are subject to change.

A guarantor cannot solve all of these issues, but it can directly address the LVR constraint, which is often the one blocking approval.

What Types of Guarantees Are Typically Available?

A related but distinct question is what kind of guarantee the lender actually accepts, because not all guarantor structures are the same. The two most common types are:

The security guarantee is the most widely used structure for Australian expat borrowers. It keeps the guarantor’s exposure defined and limited, and it directly targets the LVR metric that many lenders focus on when assessing non-resident applications.

What Are the Risks the Guarantor Takes On?

Stepping back from the mechanics, a separate concern is the risk this arrangement creates for the guarantor, because it is real and should not be minimised. If the borrower defaults, the lender can call on the guarantor’s property to recover the outstanding debt. This means a parent or family member who has agreed to guarantee your loan is putting their own home or investment property at risk.

Key risks for the guarantor include:

• Their credit file is affected if the borrower misses repayments.
• Their own borrowing capacity can be reduced while the guarantee remains in place.
• If the borrower cannot service the loan and defaults, the lender can pursue the guarantor’s secured property.
• Exiting the guarantee requires the lender’s consent, which typically depends on the borrower reaching a specific LVR or demonstrating sufficient equity. The threshold depends on lender policy.

Both parties should seek independent legal and financial advice before entering a guarantor arrangement. This is not a formality; it is a genuine protection for the guarantor.

How Should Expats Approach Lender Selection for a Guarantor Application?

Not all lenders accept guarantor applications where the primary borrower earns foreign income, and among those that do, policies on acceptable guarantor profiles, maximum guarantee amounts, and LVR thresholds vary considerably and are subject to change. This is where lender selection becomes as important as the structure itself.

When evaluating lenders for a guarantor-backed expat application, the relevant factors include:

• Whether the lender accepts foreign income from your specific country of residence and currency.
• The income shading rate applied to your overseas earnings (this is not publicly published and varies lender by lender).
• The lender’s guarantor policy: who qualifies, what equity is required, and how the guarantee can be released over time.
• The documentation requirements for both the borrower and the guarantor.

ODIN Mortgage holds proprietary data on how more than 40 Australian lenders assess foreign income applications, including their approach to guarantor structures. That kind of lender-by-lender intelligence is not available publicly, and it is often the difference between an application that progresses and one that stalls at assessment.

Frequently Asked Questions

Can an Australian expat use a guarantor if they earn income in a foreign currency?

Yes, in principle. However, the lender must accept both foreign income and a guarantor arrangement simultaneously. Not all lenders do. Lender selection is critical, and outcomes depend on the borrower’s country of residence, currency, and individual profile.

Does the guarantor need to be in Australia?

In most cases, yes. Lenders typically require the guarantor to be an Australian resident who owns Australian property with sufficient equity. Guarantor eligibility criteria vary by lender and are subject to change.

Can the guarantee be removed after settlement?

Yes. Once the borrower has built sufficient equity or met the LVR threshold required by the lender, the guarantee can generally be released with the lender’s consent. The specific threshold depends on individual lender policy.

Does using a guarantor eliminate lenders mortgage insurance (LMI)?

A security guarantee that reduces the effective LVR may help a borrower avoid LMI, but this depends on the lender’s specific policy and how they calculate the LVR with a guarantee in place. This is not a universal outcome and should be confirmed with the lender.

Does the guarantor need to have their property fully paid off?

No. The guarantor needs sufficient equity in their property, not full ownership. How much equity is required depends on the lender’s policy and the size of the guarantee being provided.

Is a guarantor arrangement the right structure for every expat?

Not necessarily. It depends on the borrower’s deposit position, income shading impact, the guarantor’s equity and financial situation, and the specific lender. It is one tool among several available to expat borrowers, and it carries obligations for the guarantor that require careful consideration.

Is ODIN Mortgage regulated in Australia?

Yes. ODIN Mortgage is regulated under ASIC and the National Consumer Credit Protection Act (NCCP). All credit advice is provided through formal consultations, not through general content.