A guarantee is an agreement from a guarantor to make repayments on the loan taken out by another person (the borrower) in the event that they are unable to repay the loan.

When a guarantee is used with a home loan then the guarantor is liable to make payments on the home loan in the event that the borrower cannot meet their obligations. The guarantee amount can be limited with some lenders, usually to 25% of the loan amount.

The guarantee is in most cases supported by a mortgage over the guarantors property to provide security for the lender. The Code of Banking Practice states that banks should only call on a guarantee if attempts to recover money from the borrower have been unsuccessful.