Sammie Ellard-King
I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.
Quickfire Roundup:
If you’re looking to buy your own home, but your credit history is lacking, a guarantor mortgage offers a great solution.
This type of mortgage opens up the doors for people to get onto the property ladder even if they have a low income, no deposit and a poor credit score.
While this is a great way to get a mortgage and own your own home, if managed poorly, it could end up harming your relationships.
If you miss any mortgage payments it’s both you and your guarantor who stand to suffer.
The average age of first-time buyers is on the up in the UK. Many people are finding it difficult to meet the requirements of mortgage lenders, and this leaves them unable to make that move.
It could be that their savings account is lacking and there’s no hope of raising a deposit or it could be that bad credit is creating a hurdle.
Regardless of the reasons, guarantor mortgages offer a solution.
I want to share with you the benefits offered by guarantor mortgages. I want to help you discover the answer to what is a guarantor mortgage so you can understand whether it’s suitable for you.
If you’re looking to get your foot on the property ladder, then I hope that this will help.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
Table of Contents
What is a guarantor mortgage?
So, what is a guarantor mortgage? Well, you may have heard of these being referred to as family-assisted mortgages.Â
That’s because a close family member is often appointed as a guarantor.
This means that the guarantor’s estate is used for security and if you miss any mortgage payments this can be used to cover what you owe.
This allows you to buy your own property even if you have a low income and a bad credit score. It also allows you to move forward with little or no deposit.
A mortgage lender is happy to take this risk as your guarantor must pay your mortgage if you don’t.
How does a mortgage with a guarantor work?
A guarantor mortgage works by the mortgage lender placing a legal charge on the guarantor’s property. There may also be a legal charge placed on the guarantor’s savings.Â
That means that, if you fail to pay your mortgage, your guarantor’s home could be at risk.
Given that your guarantor becomes legally responsible for covering your mortgage payments, a guarantor mortgage can only proceed once the proposed guarantor has moved to seek legal advice.Â
While a mortgage advisor may recommend the product, the risk to the guarantor’s savings or property means they must seek advice from a solicitor.
The key things to remember when looking at how guarantor mortgages work are:
- When you get a guarantor mortgage, the lender will place a legal charge on your guarantor’s property. As well as this, the guarantor agrees that their savings account can also be used as security
- If the borrower defaults mortgage guarantors are legally responsible to make the monthly repayments. If they don’t their own home and savings are at risk and their credit score will suffer
- A guarantor mortgage creates a legal obligation for the guarantor to cover your mortgage repayments, but they don’t own any part of the property that has been purchased
Is a guarantor mortgage the right option for you?
Are guarantor mortgages suitable for your personal circumstances?Â
If any of the following apply, then there’s a good chance that they are:
- You can only save a small deposit (or even a zero deposit)
- You’re looking for a mortgage with bad credit
- You have a low income and lenders worry that you can’t meet the monthly repayments
If you’re experiencing any of these issues, then a mortgage guarantor could well be the solution. As well as allowing you to buy a property, you’ll find that a guarantor mortgage deal opens up some great offers.Â
With the risk to the lender being reduced, you could find a great mortgage deal with a great rate.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
Who can I approach to be a mortgage guarantor?
Regarding guarantor mortgages, some lenders will allow you to use friends. However, most mortgage lenders will insist that your guarantor is a close family member.Â
Often, it’s parents or grandparents that make the best option as they tend to be in a stable financial situation.
Usually, your choice of guarantor must have a good credit history. Some lenders will insist that your guarantor has paid off their own mortgage and is mortgage-free.Â
Other lenders won’t object to a guarantor mortgage if there is enough equity. If there is negative equity, this will cause problems with an application.
Many lenders will consider savings as security if your proposed guarantor has retired and no longer has a work income. A family member’s savings would then be at risk if you failed to make your monthly payment.
If you’re still wondering who would make an ideal guarantor, borrowers typically use:
- Grandparents
- Parents
- Siblings
- Stepfamily members
How does my guarantor get accepted?
When lenders offer mortgages, they will each have their own eligibility criteria.
However, when it comes to looking at a guarantor’s circumstances, they will be looking for pretty much the same.Â
This means that a guarantor will need:
- A strong credit score
- No issues with past payment history
- To be a homeowner (although some lenders may overlook this)
- Typically, be a family member
- Have sufficient savings
- Understand what is meant by guarantor liability
If your guarantor passes these checks, then you’re in a good position to move forward.
Who owns the property with a guarantor mortgage?
When you purchase a property with a guarantor mortgage, the property is yours and does not belong to your guarantor.Â
Their details don’t appear on the property deeds, and they don’t own a share of the house. It isn’t a joint mortgage.
Who does gaurantor mortgages?
There are 100s of providers that offer guarantor mortgages but the best thing to do is book a free consultation in with a broker that has access to the whole market.
Boon Brokers just below can help here and have a 5-star rating on Trustpilot.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
What are the advantages of a guarantor mortgage?
Now that you know more about how guarantor mortgages work, you may be wondering what the main advantages of these mortgages are. They include:
- The ability to benefit from someone else’s good credit score
- The chance to secure a 100% mortgage. This is great for those who are struggling to save a deposit
- Being able to buy your own house even with a low income
FAQs
What if my guarantor dies?
If your mortgage guarantor dies, some lenders will allow the agreement to pass to their spouse.
In some circumstances, the lender will be entitled to a share of the guarantor’s estate to ensure that the debt is covered.
Are guarantor mortgages more expensive?
The answer here is that it depends.
If your guarantor has a good credit history and a property with plenty of equity, combined with savings, then the risk to the lender is reduced.
This means that you will get access to some good deals.
However, if the property value is high and you need a 100% mortgage, this exposes the lender to more risk and this may result in higher rates.
Can a retired person be a mortgage guarantor?
No, a retired person cannot be a mortgage guarantor. You are required to provide proof of income and be able to show good creditworthiness.
Final thoughts
Hopefully, you’re now more than confident to answer, “What is a guarantor mortgage?” and you can see what a valuable tool these are.
If you’re lacking when it comes to a deposit or if your financial circumstances just aren’t great, these mortgages offer a lifeline that can make homeownership a reality.
The big watch out with guarantor mortgages is the impact that they can have on your relationships.
When you consider that your guarantor’s home and savings are at risk, you must ensure that you never breach the trust that has been shown in you.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
