How Much Can a Guarantor Increase Your Borrowing Power?
One of the main reasons borrowers consider a guarantor loan is to increase borrowing power or enter the market sooner. While a guarantor can make a meaningful difference, the impact isn’t unlimited and depends on several factors. Understanding how much a guarantor can increase your borrowing power helps set realistic expectations before applying.
How Borrowing Power Is Normally Calculated
Lenders assess borrowing capacity based on income, expenses, existing debts, and interest rate buffers. Without a guarantor, the size of your deposit can limit how much you can borrow.
This is where a guarantor can help reduce lender risk.
What a Guarantor Changes in the Assessment
A guarantor allows part of the loan to be secured against another property, reducing the loan-to-value ratio on the purchased property.
This can allow you to borrow more than you otherwise could with your deposit alone.
Why Income Still Matters
A guarantor does not replace serviceability requirements. You must still be able to afford the loan repayments based on your income and expenses.
Borrowing power increases are limited if servicing is already stretched.
How Much Extra You Might Borrow
The increase in borrowing power varies depending on deposit size, income, and lender policy.
In many cases, a guarantor helps borrowers bridge the gap between their savings and what’s required to avoid lenders mortgage insurance.
Why This Matters for Australian Borrowers
Some borrowers assume a guarantor guarantees approval or unlimited borrowing. In reality, guarantors mainly help with deposit-related constraints rather than income limitations.
How The Finance Brokers Can Help
The Finance Brokers assess how much difference a guarantor will realistically make before any application is submitted. They compare lenders to maximise borrowing power while keeping guarantees as limited as possible.
Wondering If a Guarantor Will Help You Buy Sooner?
If you’re unsure whether a guarantor will meaningfully increase your borrowing power, tailored advice can help you decide the best approach.
Book a free consultation with The Finance Brokers
Final Thoughts
A guarantor can increase borrowing power in the right circumstances, but the impact depends on income, expenses, and lender policy. Understanding the limits helps borrowers and families plan confidently.
