guarantor loans: pros, cons and who qualifies

First home buyers across Cairns secured 187 guarantor loans in the June quarter, up from 142 the same period last year, according to figures released this week by the Queensland Treasury.

The increase comes as the state median house price sits near $420,000 and tourism operators in the Northern Beaches scramble to house new workers ahead of the peak season.

Local market pressure

Properties along Captain Cook Highway in Trinity Beach and near the Smithfield shopping centre have drawn the strongest interest from younger buyers who lack a full 20 per cent deposit. Local branches of the Commonwealth Bank and Bendigo Bank both reported a rise in guarantor applications from couples aged 25 to 32 working in hospitality and retail.

Chinese investment returning to the Cairns market has also pushed some entry-level stock higher, with three-bedroom homes in the $480,000 to $520,000 range selling within ten days of listing.

Pros, cons and eligibility

Guarantor loans allow parents or close relatives to use equity in their own home to cover part of the deposit, cutting the buyer’s upfront cash requirement to as little as 5 per cent. The main drawback is that the guarantor remains liable until the loan-to-value ratio drops below 80 per cent, which can take five to seven years on a standard Cairns mortgage. Only Australian residents with sufficient equity in an unencumbered or low-loan property qualify, and most lenders require the guarantor to be a parent, sibling or long-term partner.

Buyers considering the option should book a meeting with their lender before signing any contract, check current grant eligibility through the Queensland Revenue Office website, and obtain independent legal advice on the security arrangements.