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If my guarantor sells their house, what happens to my loan?
Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 4 min read
The short answer
It all depends on what your property is worth at the point your guarantor is looking to sell. We redo a valuation, and if your loan is now under 80% of your property's value, the guarantee can generally come off and their sale goes ahead as normal.
If your loan is still above 80% when they go to sell, there are two main options. Either we move your loan to a new one where you may pay lenders mortgage insurance, so the guarantor comes off, or a portion of their sale proceeds goes towards bringing your loan down to that 80% mark.
The 90 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.
Why their sale involves your loan
The whole premise of a guarantor is that they stepped in because you didn't have a 20% deposit, meaning your loan was going to be more than 80% of what your property was worth. Their property is security for part of your loan, so the bank holds a mortgage over it.
That's why they can't just sell without it touching you. For their sale to settle, the bank has to release its mortgage over their house, and it will generally only do that once it's comfortable your loan can stand on its own without the guarantee. So the conversation about the guarantee has to happen before or alongside their sale, not after the contract's signed.
Step one: a fresh valuation
When your guarantor is getting ready to sell, we redo a valuation on your property to see what your loan is against what your property is worth now. Paying the loan down, plus property growth, generally means that over time you get closer to that 80% mark, and often past it. The lenders that write down a release test want your loan under the level where you'd need lenders mortgage insurance, on a fresh full valuation, with your repayments up to date.
If you're there, it's generally straightforward: the guarantee is released, their property comes off, and your loan carries on as it is. If you're close but not quite, it's worth knowing whether a valuation with a different lender comes back higher, because a better number can be the whole difference.
If you're still above 80%
Option one: we move your loan onto a new one where you may pay lenders mortgage insurance and possibly a slightly higher rate, but it means the guarantor comes off completely. That depends on you qualifying for the new loan on your own income, so we'd run the numbers first.
Option two: if that doesn't qualify, or you don't want to go that way, and your guarantors are in a position to help even more, a portion of the proceeds from their sale can go towards reducing your loan down to that 80% mark when their sale settles. To give you a bit of an idea, if your property values at $620k, 80% is $496k. Owe $540k and roughly $44k of their proceeds would bring you under the line. Your loan then continues the way it is and the guarantors drop off.
Some lenders will also look at moving the guarantee onto your guarantor's next property if they're buying again, which is worth asking about if they don't want to hand over cash.
The honest bit: start the conversation before they list
The worst version of this is finding out a week before their settlement that the bank won't release them. Valuations take time, new loans take longer, and none of it can be rushed once a contract is signed.
So if your guarantor is even thinking about selling, get the valuation done early. Budget for the possibility of a valuation or discharge fee too, because lenders don't all spell out who pays at release.
Is your guarantor thinking about selling?
A 30 minute call. We order a fresh valuation, see where your loan sits against 80%, and map out the cleanest way to release them.
No cost to you. The bank pays me when a loan settles. · How I get paid
Next question
When do my parents come off as guarantor, and can they guarantee more than one kid?The game plan: when your loan is 80% of what the property is worth, the guarantee gets released.
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