Guarantor Mortgages and Joint Borrower Sole Proprietor Setups

Guarantor mortgages are loans which are secured against the property you’re buying. You have to put down a deposit just like you would with any other mortgage. They're usually repayment mortgages as they’re primarily taken out by first-time buyers. With a repayment mortgage, you pay back a bit of your mortgage balance each month, with interest.

The main differences between guarantor mortgages and traditional repayment mortgages are that, with a guarantor product, a parent or other relative guarantees to meet your monthly mortgage payments if you can’t. They’re assessed like borrowers but they don’t put up any assets as security, they don’t have to help with the deposit, they’re not updated in the same way as the actual borrowers and they’re not on the title deeds - they simply guarantee the monthly payments.

There are multiple lenders that offer guarantor mortgages for first-time buyers, but some have different rules about who can be a guarantor.

There are lenders that’ll allow the following people to act as a guarantor:

• Parent/Guardian
• Grandparent
• Other relative
• Spouse

It’s important to note that some lenders will only allow guarantors who are either the parent, guardian or grandparent of the borrower.

You can act as a guarantor for someone even if you have a mortgage on your main residence, however the lender will assess your - the guarantor’s - disposable income after any existing mortgage payments, as part of their overall affordability calculations. This also means that if you're already a guarantor on a mortgage, it may affect your affordability on a mortgage you're looking to obtain for yourself.

Most lenders will ignore any buy-to-let mortgages that a guarantor has in the background, as they should be self-funding investments.

This is also true for joint borrower sole proprietor arrangements, which we explain below.

Both guarantor mortgages and joint borrower sole proprietor setups are especially useful for first-time buyers, but not exclusively.

They both give the borrower the opportunity to improve the affordability of the overall mortgage application by having someone else support it. The better the affordability, the more money they can potentially borrow.

What Happens if You Default on Your Payments?

If you can’t meet the mortgage repayments, your guarantor will be asked to make up any shortfall, possibly the full monthly payments. If neither you nor your guarantor meet the monthly payments, then the lender could ultimately repossess your property.

The fact your guarantor won’t be on the title deeds of the property means they won’t have any ownership rights to the property, even if you default on your payments.

Guarantor products are much rarer now. They’ve been replaced by a similar mortgage arrangement called joint borrower sole proprietor.

Joint borrower sole proprietor is more of a mortgage arrangement than a product. It's where 2 or more people that take out a mortgage are all considered borrowers but aren't all on the title deeds of the property.

The main difference between guarantors and joint borrower sole proprietor setups is that a guarantor isn’t considered a borrower – although they are assessed as such - they simply guarantee to meet the monthly mortgage payments.

Besides from that fundamental difference, they work rather similarly.

Let’s say a young couple want to buy a property. They can take out a mortgage which includes both of them and one of their parents.

If they take out a guarantor mortgage, the parent won’t be on the title deeds. The parent will be assessed like a borrower, but after that they’ll only be responsible for making the mortgage payments if the couple don’t. The guarantor also wouldn’t receive updates from the lender, like notifications that their product is coming up for renewal.

On the other hand, if the couple and one parent take out a mortgage as “joint borrower with sole proprietor” arrangements, they’ll all be equally responsible for the mortgage repayments but only the couple will be on the title deeds. The parent will be assessed as a borrower and will receive notifications from the lender.

As of 2023, there are a number of guarantor mortgage lenders offering guarantor mortgages and joint borrower sole proprietor mortgages.

We’ve listed some of the bigger names offering guarantor mortgages or joint borrower sole proprietor setups below:

• Swansea Building Society
• Leeds Building Society
• Nationwide
• Tipton Building Society
• Dudley Building Society
• Metro Bank
• Barclays
• Skipton Building Society
• Newbury Building Society
• Buckinghamshire Building Society
• Furness Building Society

When it comes to finding guarantor mortgage lenders offering these setups, it’s important to consider your needs, your income, your supporting applicant’s income and how much you want your monthly repayments to be.

The easiest way to do this, and find out the deals and lenders available to you, is to speak to a mortgage broker like John Charcol. We can point you in the right direction.

Similarly, if you’re a parent wanting to find out more about how to be a mortgage guarantor or how to support your child as they try to get onto the property ladder, get in touch as we’ll be able to explain all the options available for your situation.

Although joint borrower sole proprietor setups have effectively replaced guarantor products, the benefits remain the same.

The benefits of guarantors and joint borrower sole proprietor setups include the following:

• Guarantor mortgages and joint borrower sole proprietor mortgage setups can improve affordability. When a bank or mortgage provider takes the buyers and the supporting applicant’s credit and income into consideration, they can improve the overall affordability of the application, meaning you can borrow more. Essentially this enables first-time buyers to purchase a property that costs more and meets all their needs
• First-time buyers are still eligible for the Stamp Duty exemption. As the guarantor or joint borrower supporting the application won’t be named on the title deeds of the property, first-time buyers can still take advantage of reduced Stamp Duty Land Tax. However, the Government states this only applies when purchasing a main residence worth less than £625,000
• Additional Stamp Duty won’t be charged. Even if the guarantor or joint borrower supporting the application already owns a property, you won’t be charged any additional Stamp Duty as they’re not going on the title deeds and won’t have any ownership rights

Although guarantor mortgages and joint borrower sole proprietor mortgage setups deliver many benefits, they also carry some risks and limitations you should consider.

The main risk for a guarantor mortgage or joint borrower sole proprietor setup is that if the proprietor is unable to meet their mortgage payments, the supporting applicant must. If the mortgage payments aren’t made on time, then all borrowers on the mortgage risk damage to their credit score. 

One notable limitation to consider is that if the guarantor or joint borrower is approaching retirement age or has adverse credit, the lender may cap the maximum borrowing.

Guarantor mortgages and joint borrower sole proprietor setups help many people who may otherwise find it challenging to purchase a home. Many joint borrower sole proprietor and guarantor mortgage lenders will provide a mortgage that is often larger than a first-time buyer may otherwise be able to afford.

Whether you’re looking to help your children get on the property ladder or are hoping to find out whether your parent or guardian could be a guarantor for you, get in touch with our experts. We know where to look for the joint borrower sole proprietor arrangements and guarantor mortgage deals that’ll best suit your situation. Call us on 0330 433 2927 or contact us to make an enquiry.