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Guarantor mortgages explained

A guarantor mortgage involves someone you know, usually a parent, guaranteeing your mortgage to your lender. This means that they are, essentially, guaranteeing to repay what you owe on the mortgage if you’re unable to keep up with your payments.

In some cases, your guarantor will have to offer their home or savings as security against the loan, and they will be jointly liable with you for the debt secured against your home. That means that they must understand the responsibilities and potential legal implications of being guarantor for a mortgage before agreeing to go ahead with it.

That’s the main disadvantage of a guarantor mortgage - if you fail to meet repayments and your home has to be repossessed, your guarantor will be liable for any shortfall.

The major benefit of a guarantor mortgage is that it can be a huge help if your current income doesn’t quite meet a lender’s affordability requirement, or if you’re a first-time buyer and only have a small deposit. The support of a guarantor could help you to get on the property ladder when you may otherwise not be able to do so.

Many lenders no longer accept applications backed by a guarantor, but other options are available such as a Joint Borrower Sole Proprietor (JBSP) mortgage. This is an alternative to a parent guarantor mortgage, and it means that your parent or parents will be added to your mortgage, but not named on the title deeds. That means that you’ll be able to use their income alongside your own to gain better rates than you might otherwise have access to. Both parties are then jointly responsible for paying the mortgage. Of course, this isn’t just for parents and children, although that’s the most common scenario. It can also be an alternative to a family guarantor mortgage, or it may be used by couples where one individual earns significantly more than the other.

With both JBSPs and guarantor mortgages, the guarantor or joint borrower is not named on the title deeds so they won’t have ownership rights and won’t pay additional Stamp Duty.

Guarantor mortgage process

The first step, when you want to apply for a guarantor mortgage, is to use a mortgage broker like L&C to find deals that are suitable for you and your circumstances. It can be a complicated process, and there is less availability than for other types of mortgages, so it’s best to go via an expert who can help you through the process and find guarantor mortgage providers that may not be available on the open market.

It’s also important that you and your guarantor seek legal advice from a solicitor to understand the implications of this type of mortgage, whether you find a guarantor mortgage deal or go for a Joint Borrower Sole Proprietor mortgage. In fact, many lenders will only accept your application if you can prove that you’ve sought legal advice - so you should factor the cost of this into your overall budget.

Guarantor mortgage eligibility criteria

Being a guarantor for a mortgage involves providing security against the loan and there are two main ways that this can be done: by using either the guarantor’s savings or their own property. There are a few subtle differences in how a guarantor mortgage works in each case.

With a mortgage that uses property as security, the lender can sell the guarantor’s property if monthly payments aren’t kept up. This means the risk is lower for the lender. If you choose this type of mortgage, the guarantor will be added to the legal documents, agreeing that they will make repayments if the borrower can’t. They won’t be named on the property’s title deeds, and they won’t own a share of your property.

With mortgages that use savings as security, the guarantor will provide money to cover missed payments rather than securing their house against the mortgage. They may put money into a special savings account (and if the money isn’t needed for covering missed payments, it can be used as a regular savings account), or they may put money into an account that’s directly linked to the mortgage (in which case the repayments are usually cheaper, but the guarantor can only get their money back at the end of the mortgage term).

Because it’s a risky type of loan for lenders to offer, there are some specific rules about who can act as a guarantor on a mortgage. They must:

  • Own their own property outright, or have enough equity in it to meet the lender’s minimum requirements. This will vary between providers, but often a guarantor is required to own at least 50% of their home.
  • Have a high enough income to help cover your repayments if necessary, whilst still meeting their own monthly mortgage payments (if they have any)
  • Have a high credit score and a stable financial history

If you’re unsure whether you qualify, you can check your eligibility for a guarantor mortgage here at L&C.

Guarantor mortgage deals

As with other types of mortgages, having a bigger deposit can help you to secure the best guarantor mortgage rates. Although many people choose this type of mortgage because they can only afford a small deposit, it makes sense to save as much as you can, opting for a 15% deposit over a 10% one, for example.

Both the borrower and the guarantor will be credit checked when applying for this type of mortgage, so it’s important to ensure that both parties have a good credit score. If you have any bad debts, these should be cleared before applying for your mortgage, and if you notice any mistakes in your credit records, these should be rectified as soon as possible as even small mistakes can have an impact on your ability to get a good deal.

Guarantor mortgage repayment plan

Repayment for this type of mortgage is the same as any other - with the exception that, if you fail to make your monthly payments, your guarantor will be liable to make up the shortfall.

All being well, though, you’ll pay in the normal way. If you have a fixed rate mortgage, you’ll make set monthly payments for the duration of your fixed rate term, whilst if you have a variable rate deal, this will fluctuate as interest rates rise and fall.

Apply for a guarantor mortgage with L&C

If you need a guarantor mortgage but aren’t sure which deals you’re eligible for, L&C is here to help. As a guarantor mortgage broker, we’re experts in finding you the best deal based on your individual circumstances, and we can compare guarantor mortgages to find deals that may not be available on the open market. Whatever your requirements, our expert advisers are on hand to provide you with all the support you need to help you get on the property ladder.

Once you’ve applied for your mortgage, you’ll be able to track your application online 24/7, and a dedicated case manager will help you through the whole process. Get in touch with L&C today so we can find you the best deal.

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Apply for a guarantor mortgage with L&C

If you need a guarantor mortgage, but aren’t sure which deals you’ll be eligible for, L&C is here to help.

We can talk you through any guarantor mortgage options available to you and recommend the best deal based on your individual circumstances. Whatever your requirements, our expert advisers are on hand to provide you with all the support you’ll need to help you get onto the property ladder.

Once you’ve applied for your guarantor mortgage, you’ll be able to track your application online 24/7, and a dedicated case manager will help you through the whole process. So get in touch with L&C today so we can find you the best deal.

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Frequently asked questions

How does a guarantor mortgage work?

When you apply for a guarantor mortgage, someone (usually a family member) guarantees that they will be legally responsible for keeping up with the mortgage payments if you’re unable to do so. The guarantor won't appear on the title deeds and they don't own a share of the house, but they are legally responsible for supporting with payments if you fail to do so.

Can I get a bigger mortgage with a guarantor?

Having a guarantor might enable you to get a slightly bigger mortgage than you’d be able to without one. Some lenders even offer guarantor mortgages without a deposit, as the guarantor's house or savings are used as security. However, it's important to note that lenders will still want to see proof that you’ll both be able to afford the monthly repayments.

Who can be a guarantor on a mortgage?

To be a guarantor on a mortgage, you must be a homeowner. If you have a mortgage on your own property, you must be able to demonstrate that you have enough income to cover repayments on your own property, as well as on the property you are looking to guarantee. It's essential that guarantors have a strong credit history and lenders will usually want proof of their income.

How much can I borrow with a guarantor mortgage?

How much you can borrow with a guarantor mortgage will depend on several factors including the size of your deposit, your income and the property value. You can use our mortgage calculators to get a better idea of how much you might be able to borrow.

Can I get a guarantor mortgage with no income?

Some mortgage providers are willing to lend money to those with no income, providing the guarantor is willing and able to cover the monthly mortgage repayments. However, your choice of lenders is likely to be greatly reduced. We can help you to find suitable mortgage deals if you're looking for a guarantor mortgage without an income, or if you have a low income.

Are guarantor mortgages a good idea?

If you have a poor credit score, a small deposit, or you're on a low income, a guarantor mortgage could help you to buy your first home, as it will give lenders greater security. However, it's important to note that being a guarantor isn't to be taken lightly, and your guarantor will be responsible for keeping up your mortgage payments if you're unable to do so. Their house could even be repossessed if the lender is unable to recoup the money owed. Before deciding to take on a guarantor mortgage, you and your guarantor should seek legal advice.