Can I use a guarantor and the 5% deposit scheme together?

No. Every lender that documents both treats loans with a guarantor as ineligible under the government 5% deposit scheme. It's one structure or the other.

Which is better, a guarantor loan or the 5% deposit scheme?

Neither is universally better. No deposit saved and family with equity: the guarantor gets you in sooner. Deposit saved: a renovator favours the guarantor so your cash does the work, a set-and-forget property favours the 5% down and the smaller loan.

Do all lenders accept guarantor loans?

No. Around half the market does; the rest, including some major lenders, don't take family guarantees at all. Of those that do, many require the guarantor's property to be unmortgaged or lightly geared, commonly capped around 70% of its value all-in.

Is the guarantor liable for my whole loan?

Usually not. At most lenders the guarantee is limited, capped at roughly 20% of the purchase price plus costs, which is the slice standing in for your deposit. A small number of lenders default to a full guarantee unless a limited one is requested, which is worth catching before documents are signed.

Can I buy with no deposit at all using a guarantor?

Theoretically yes. Most lenders will fund up to the purchase price plus costs against the combined security, which is how buyers with strong income but no savings get in. Your income still has to service the full loan on its own.

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Guarantor loan or the government 5% scheme: which one is best?

Bayley Clarke · Mortgage broker on the road · Last checked 1 September 2026 · 3 min read

The short answer

It depends where you're at with your deposit. If saving even 5% is a couple of years away because your rent is high, but you've got access to a guarantor, the guarantor option gets you in now, paying your own mortgage instead of your landlord's, before the goalposts move again.

If you've already got the deposit saved, it comes down to what you're buying. A place that needs love: cash is king, use the guarantor and keep your savings for the renovation. Set and forget: put the 5% down and carry a slightly smaller loan. One thing the brochures don't say: you can't stack them. Every lender that documents both treats a guarantor loan as ineligible under the scheme, so this is a genuine either-or.

The 90 second version. The rest of this page is the detail underneath it.

The rule nobody mentions: it's one or the other

I checked this across my whole panel, because people ask about using a small guarantee to top up a scheme spot. The answer is no. At every lender that documents both products, loans with a guarantor of any kind are an ineligible loan type under the government 5% deposit scheme. The scheme's whole mechanism is the government guarantee standing in for the missing deposit; the bank won't hold a family guarantee alongside it.

So this isn't a blend-to-taste decision. You're choosing a structure, and the structure then chooses which lenders are available to you.

What each one actually is

The guarantor loan: your parents (at most lenders it's parents, sometimes siblings or grandparents) offer part of their own property's equity as extra security. You can borrow up to the full purchase price plus costs, theoretically no deposit at all. The guarantee is usually limited, capped around 20% of the price plus costs, not the whole loan, and the banks cap how far the family home can be geared all-in, commonly around 70% of its value. Roughly half the lenders that accept guarantees also require theirs to be the only mortgage on the guarantor's property, so if mum and dad still owe money on their place, that alone narrows the field.

The 5% scheme: you save 5%, the government guarantees the gap to 80, and you pay no LMI. No family exposure, nobody else on the hook. The catch is coverage: not every lender offers it, a couple of well-known ones have pulled out of it, and one big bank's version isn't available through brokers at all. Price and income caps apply, and the deposit generally needs to be genuine savings.

How I actually pick between them

Deposit timeline first. No 5% saved and rent eating the savings rate: guarantor, get in now, stop the goalposts moving. That's the clearest case, especially in a rising market.

Deposit already saved: property type decides. If it needs renovating, your cash working on the house beats your cash locked in it as deposit, so guarantor in and savings out swinging. If it's set and forget, the 5% down means a smaller loan and a smaller repayment, and nobody's parents are involved.

And one more real-world filter: the guarantee has to actually fit. About a dozen of the lenders on my panel accept family guarantees and about as many don't, including some very big names. The guarantor's own mortgage position, their age, and what they still owe can each rule lenders out. Sometimes the scheme wins simply because it's the door that's open.

The honest bit: there's no right answer, and that's not a cop-out

There's no universally best option here, just your deposit, your family's position, and the property in front of you. What I'd push back on is the assumption that the guarantor path is the risky one and the scheme is the safe one. A limited guarantee is a defined, capped exposure with a clear release plan, and the scheme has its own constraints: price caps, income caps, and a smaller lender menu.

The decision that actually matters is made before either application: which structure fits your numbers, and which lenders that structure leaves you. Get that right and both paths are safe. Get it wrong and you find out at approval time.

Want the choice made on your numbers?

A 30 minute call. Your deposit position, your family's equity if they're offering it, the property type you're hunting, and I'll show you both structures side by side with which lenders fit each. Then you choose with the numbers in front of you.

Book a 30 minute call Call 0437 189 939

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Next question

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