Australia Family Pledge Calculator
Calculate exactly how much LMI you save with a Westpac Family Pledge, CBA Family Pledge, or ANZ Family Guarantee. Enter your deposit, property price, and parental equity to see your effective LVR, estimated LMI saving ($10,000-$30,000 typical), when the pledge is released, and the exact financial risk to your parents. Includes limited vs full pledge comparison and investment property analysis.
A family pledge (also called family guarantee or family security guarantee) allows parents or family members to use their property equity as additional security for your loan, effectively giving you a higher LVR without LMI.
No parental involvement
Higher borrowing cost
Standard approval process
Parents pledge A$80,000
Lower upfront cost
Pledge released when LVR ≤ 80%
| Stage | What Happens | Who Is Involved |
|---|---|---|
| 1. Application | Buyer applies for loan with family guarantee. Parents assessed for suitability. | Buyer, parents, lender |
| 2. Security | Parents' property registered as additional security alongside buyer's property. | Lender, solicitor |
| 3. Settlement | Loan settles. Buyer takes ownership. Parents' property is a second mortgage security. | Settlement agent |
| 4. Repayments | Buyer makes all repayments. Parents have no repayment obligation unless buyer defaults. | Buyer (primary) |
| 5. Release | When LVR drops to ~80% through principal payments and/or appreciation, parents' property released. | Lender, solicitor |
If the buyer defaults, the lender can pursue the parents' property for the guaranteed amount. Model the exact financial exposure for your parents.
| Scenario | What Happens to Parents | Worst Case Exposure |
|---|---|---|
| Buyer makes all payments | No impact on parents. Pledge released when LVR ≤ 80%. | $0 — no risk materialises |
| Buyer defaults, property sells above loan | Parents' property not touched. Loan repaid from sale proceeds. | $0 — no risk to parents |
| Buyer defaults, shortfall up to pledge | Lender claims up to A$80,000 from parents' property. | A$80,000 |
| Buyer defaults, limited pledge exhausted | Lender can only claim pledge amount — not parents' full property. | A$80,000 (limited pledge) |
How to Use This Family Pledge Calculator
Enter your property purchase price, your own deposit, and the amount of parental property equity being pledged as additional security. The calculator shows your effective LVR with the family pledge, the LMI you avoid, and when the pledge is likely to be released.
What the Family Pledge Does
- Parents pledge equity in their property as additional security for your loan
- This gives the lender effectively more security, reducing your LVR below 80%
- You avoid Lenders Mortgage Insurance (LMI), typically $10,000-$30,000 in savings
- Parents have no repayment obligation unless you default
- The pledge is released when your LVR drops to 80% (or 70% for investment)
Family Pledge Formula
LMI Saved = LMI on Nominal LVR - LMI on Effective LVR
Example:
Property Price: $650,000
Your Deposit: $50,000
Loan Amount: $600,000
Nominal LVR: $600,000 / $650,000 = 92.3% (LMI required)
Parental Security: $80,000
Effective LVR: $600,000 / $730,000 = 82.2%
Limited Pledge Amount = Loan - (80% × Property Price)
= $600,000 - $520,000 = $80,000 pledged
The limited pledge amount is the minimum guarantee needed to bring your effective LVR to 80%. This reduces parental risk to only the necessary amount rather than the full loan.
Example: Family Pledge Calculation
James and Emma buying their first home in Sydney
James and Emma want to buy a $750,000 property. They have $55,000 saved. Emma's parents have $250,000 equity in their home and are willing to pledge $95,000 as a limited guarantee.
| Purchase Price | $750,000 |
| Their Deposit | $55,000 (7.3%) |
| Loan Amount | $695,000 |
| Nominal LVR | 92.7% (LMI required) |
| LMI Without Pledge (est.) | $19,460 |
| Parental Pledge | $95,000 (limited) |
| Effective LVR | 81.8% of $845,000 combined |
| LMI With Pledge | ~$0 (effectively at 80% LVR) |
| LMI Saved | ~$19,460 |
| Monthly Repayment (6.2%, 30yr) | $4,247/month |
| Estimated Pledge Release | ~7 years via repayments |
By using a limited family pledge, James and Emma save approximately $19,460 in LMI. Emma's parents are only at risk for $95,000 — not the full $695,000 loan.