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Guarantor Mortgages

Help them secure their first home with a Guarantor Mortgage 


This specialised mortgage may be suitable for first-time buyers or students with a maximum LTV of 90% and includes no second home tax for parents.


What is a guarantor mortgage? 


A guarantor is a person not living at the address who takes on joint responsibility for payments on a property. 

It is common for landlords to require guarantor details from students and young people in the rental market. Doing so gives the landlord peace of mind that should the tenant be unable to pay rent, someone will be legally obliged to step in for them. This is often a parent, guardian or older relative.

Similarly, some lenders offer a specialised guarantor mortgage for those looking to buy. The guarantor will be required to offer their savings or property as collateral against the loan and be liable for the mortgage repayments should the borrower not meet them.

This arrangement can help people get on the property ladder and allow them to potentially borrow more than they would be accepted for alone. If the homeowner keeps up with the mortgage payments, the guarantor will not be required to do or pay anything.

However, the guarantor must be prepared to take on the financial burden should something go wrong.
 

Who are guarantor mortgages suitable for? 


Guarantor mortgages can be a blessing for those who might struggle to buy a home by themselves. They are particularly helpful for young people and first-time buyers.

This mortgage might suit you if:

  • You have a low income
  • You are struggling to save for a deposit
  • You have bad credit
  • You have little or no credit history.

Mortgage lenders will determine how much they're willing to lend you based on your income. This can be a real barrier for those who are just starting out in their careers, are self-employed, or are in lower-paying jobs. Guarantors allows you to be considered for a bigger loan and, therefore, a more substantial/suitable property.

Saving for a deposit can also be one of the biggest obstacles facing prospective homeowners, particularly first time buyers. With this mortgage, you might not be required to pay a deposit in all cases. However, it will help you get a better deal should you be able to provide one. You will also still need to have enough money to pay for any legal fees or stamp duty.

If you are young or new to the country, you may have never taken out a credit card before and have little credit history. This would count against you if you were to apply for a regular mortgage, as credit rating evaluation is an integral part of the application process. With a guarantor mortgage, lenders will consider your guarantor's credit score in place of yours, making you a more attractive potential borrower.

The best way to determine whether this mortgage is for you is to directly get in touch with The Lending Channel. We provide you with independent, no-obligation, in-depth advice based on your specific circumstances.
 

Who can be a mortgage guarantor? 


A mortgage guarantor is typically a close family member or friend. Many borrowers ask older relatives, such as grandparents, to be their guarantors because they typically have a more robust financial track record. Some lenders explicitly require the guarantor to be a family member, as familial relationships are regarded as stronger and more trustworthy than friendships.

An eligible guarantor will typically need:

  • Savings.
  • Property - sometimes, a guarantor will be required to have paid their mortgage off in full. Otherwise, the lender might accept a certain amount of equity in it. 
  • A high income - you will have to provide proof that you have the means to cover the mortgages should you need to. If the guarantor is retired, they'll have to prove that they have enough money to cover both their costs and the homeowner's loan.
  • A good credit history - this is so the lender can see how you manage your money and be confident that you are reliable financially.
  • To have received legal advice - a prerequisite for some lenders, they want to know you understand the risks of taking on guarantorship. This is advisable in any case, so if you are considering this pathway, always seek advice so you know what you agree to.


Do guarantors get credit checked? 


Yes, they do; however, the lender will do what is called a 'soft check', and it will not show up on your report or affect your score.

Lenders do this to get the measure of your financial situation and gauge whether or not you're considered reliable.
 

How does a guarantor mortgage work?


A guarantor mortgage is really designed to make the market more accessible and is popular with young first-time buyers. Once repayment begins, and should the homeowner keep up their payments, it works like a regular mortgage. The borrower's name will be on the property's title deeds, and the guarantor won't own any share of it.

The most significant difference is the prior measures that are implemented by the lender to secure this loan. The lender might take a portion of savings from the guarantor as security or take legal charge of a part of the guarantor's property. This provides peace of mind for the lender, as they know that they will be able to claim what they are owed in the absolute worst-case scenario.
 

Guarantor liability if you can't pay your mortgage 


It is generally very rare for the situation to arise where both the homeowner and the guarantor cannot offer repayment. This is because the vetting process for a guarantor mortgage is exhaustive, and lenders will only accept those they feel are very reliable.

However, if the situation changes, there can be severe repercussions to breaking the repayment contract. The lender is at liberty to forcibly sell your property, and it will fall on the guarantor's shoulders should this repossession fail to cover your costs. The lender can claim any outstanding balance from the property supplied by the guarantor. Therefore, should the worst happen, both the homeowner's and the guarantor's homes will be at risk. If the guarantor has offered up their savings, the lender will claim their money from there.

Because of this risk, it's a good idea to remortgage your home when you can. Once you've built up enough equity, you will be able to acquire a deal that doesn't require a guarantor at all.

Nevertheless, this mortgage offers a great opportunity for those who might struggle to be accepted by a lender otherwise. Call The Lending Channel today, and we'll use our years of experience to advise you on the process.
 

The Lending Channel is a member of the National Association of Commercial Finance Brokers (NACFB).
2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
Company number SC334818
Data Protection Act: Z2030159

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT

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