Our Guarantor Mortgage Service
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- Get the best guarantor mortgage deals in the UK
- Whole of market service - we work with most UK lenders
- Access to leading market mortgage rates
- Access to exclusive loan deals not available on high street
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- We have lenders who will take into account previous defaults and missed payments
- Looking to raise additional finance on top of your existing mortgage or buy to let mortgage? - we have access to a range of finance solutions
To investigate your guarantor mortgage options call our mortgage team on 0117 313 7780 or fill in our call back form.
Some lenders offer guarantor mortgages, which can provide an option for first time buyers who are struggling to get on the housing ladder. This mortgage option allows one of your close relatives, usually a parent, to provide a guarantee for the loan.
A guarantor mortgage is where a parent or close relative acts as financial security for a first time buyer buying a home who would not otherwise be able to get a mortgage on their own. When you become a mortgage guarantor you take on responsibility for someone else's mortgage repayments should the main mortgage holder not be able to meet this financial commitment.
How does a guarantor mortgage work?
- The guarantor needs to be prepared to meet your mortgage repayments in the event that you are unable to.
- This type of mortgage may mean you can borrow more funds than your income would normally allow, providing you can cover the repayments on your current income. Lenders are able to offer more money towards this type of mortgage because they have combined incomes supporting the loan.
- In order to get this type of mortgage, the guarantor will need to demonstrate that they have the means to make the mortgage repayments in addition to their own outgoings each month.
Things to be aware of:
- If the buyer defaults on mortgage payments, the guarantor will be liable. If they are unable to meet the payments themselves, they could find themselves in difficulty. In the worst case scenario, this could lead to your own home being repossessed to cover the mortgage that you are guaranteeing.
- The guarantor mortgage is taken out in the purchaser's name only. Although the guarantor has now stake in the property themselves, their income is guarantor’s income is used to guarantee the mortgage borrowing, which is a major commitment and one that needs careful consideration.
- Agreeing to act as a guarantor is a contractual obligation and very difficult to get out off should disputes arise. Many guarantor mortgage lenders require both borrower and guarantor to seek independent legal advice before they commit to the mortgage.
- Some lenders require the guarantor to cover the entire mortgage amount, while others only require the guarantor to cover the shortfall on the mortgage, i.e. the amount that you are unable to afford yourself.
Several mortgage lenders have recently brought out an alternative to guarantor mortgages called family offset mortgages.
With this type of mortgage, the person helping with the mortgage puts a lump sum into a savings account that is linked to the borrower’s mortgage. The savings balance effectively serves as part of deposit on the property the borrower wants to buy.
For example, one UK lender offers a mortgage where the helper is required to put 10% of the property purchase price into the savings account, which then means that the buyer only needs an additional 5% of the purchase price to get a 15% loan to value (KLTV) mortgage. After 3 years, the helper gets their money back, plus interest, provided that repayments on the mortgage have been kept up to date.
This type of mortgage could be suitable for parents or relatives who want to help a first time buyer buying a home without spending their savings on the deposit, or taking on the responsibilities of acting as a guarantor.
However, it’s important to be aware that the savings held in this type of account may be treated differently from normal savings accounts – for example, they may not be protected under the Financial Services Compensation Scheme (FSCS) if the lender defaults. As with a guarantor mortgage, most lenders will ask you to seek independent legal advice as a condition of taking out this kind of mortgage.
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Call our mortgage team on 0117 313 7780.