Using a Guarantor to Get a Mortgage in New Zealand
Getting finance for your first home can be challenging. In some cases, a guarantor provides the support needed to meet a lender’s criteria and secure a loan. A guarantor agrees to share responsibility for the mortgage and steps in if the borrower cannot make the repayments.
Having a guarantor strengthens your financial position and lowers the lender’s risk. This can increase your chances of approval, and may even lead to better interest rates, loan terms, and access to a wider range of lending options.
What does it mean to be a guarantor on a mortgage?
Being a guarantor means taking on legal responsibility for the loan if the borrower cannot meet their repayments. This means the guarantor agrees to step in and cover the debt should a borrower default.
to be accepted, guarantors usually need to show financial stability, a good credit history, and enough income or assets to support the guaranteed amount if required. Lenders will also consider any existing liabilities, and security such as a property or cash deposit.
Because the commitment is significant, guarantors are advised to obtain independent legal and financial advice before signing any documents.
What are the risks to the mortgage guarantor?
Deciding to act as a guarantor can make a real difference in helping a loved one buy their own home. However, it should only be done after receiving proper independent legal and financial advice, as the commitment is both significant and long term.
Legally, guarantors take on the responsibility of covering the mortgage if the borrower cannot. This includes repaying principal, interest and any fees or charges. If the lender cannot recover the debt, the guarantor could be sued. A default would also damage the guarantor’s credit history, making it harder for them to borrow in the future.
Beyond the legal and financial responsibilities, there are also personal risks. If a guarantor has to step in and make repayments, it can cause stress and put strain on family relationships.
What are the alternative options for those who don’t have a guarantor?
For those who can’t or don’t wish to use a guarantor, there are still practical ways to move forward. Options include:
Save for a larger deposit to increase the likelihood of approval.
Apply jointly with someone else to strengthen your application.
Explore flexible lender options such as specialist non bank lenders.
Sometimes, even with family support, a traditional bank may still decline an application due to criteria or past credit history. In these situations, it helps to first understand why the bank has said no so you know exactly what barriers you’re facing.
From there, many buyers find success withnon bank lending options, which can offer more flexible pathways when the banks are unable to help.
Comparing guarantors with other options
Option
Who Helps You?
What’s at Risk?
Best Suited For
Guarantor
A family member supports your loan
Their property/equity if you default
First home buyers with supportive relatives
Joint Borrower
Partner/friend co-signs the loan
Both borrowers equally liable
Couples or co-buyers ready to share full responsibility
Gifted Deposit
Family provides cash gift
None once funds are gifted
Buyers needing a top-up for deposit without ongoing liability
Non Bank Lender
Specialist lender
Higher rates/fees but flexible criteria
Buyers declined by banks due to credit history, income type, or deposit size
FAQ
Can a retired parent be a guarantor?
Yes, a retired parent can sometimes act as a guarantors if they have enough equity in their home or savings to provide the security required. Retirement status alone isn’t a barrier. What matter is their overall financial stability and whether they can reasonably support the guaranteed portion if needed. Lenders will assess this carefully, and independent legal advice is strongly recommended.Can a guarantor be removed from a mortgage?
Yes, when your financial situation improves. Common reasons for removing a guarantor include:
You’ve built up enough equity in your home – once your property value and repayments have reduced the risk, a guarantor may no longer be required.
You refinance to a new lender once you qualify on your own – your income, credit and deposit meet the standard criteria without extra support.
The guarantor wants to reduce their liability – once loan conditions allow, they can request release.
Once a guarantor is released, they are no longer liable for your mortgage, giving both parties peace of mind.
Ready to explore your options?
The appropriate approach depends entirely on individual circumstances. Whether you’re considering a guarantor or need alternatives, Platinum Mortgages can help you find the right path. We’ll review your situation, explain your options, and then guide you through the process so you can make the best decision for your future. Save yourself a lot of time, energy and anxiety; get in touch today to talk through guarantor lending and other flexible solutions.
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