Guarantor Mortgages

Finding the right mortgage can be challenging especially if you are stuggling with affordability or a low credit score. At John Charcol, we are here to guide you through options like guarantor mortgages. 

What is a guarantor mortgage? 

Guarantor mortgages are usually repayment mortgages, as theyre primarily taken out by first time buyers. With a repayment mortgage, you usually 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 payment if you can not. 

Who can be a gurantor? 

Some lenders have different rules about who can be a guarantor. There are lenders who will allow the following people to act as a guarantor. A parent of guardian, an other relative, grandparents, or a spouse. It is important to note that some lenders will only allow a guarantor that are either the parent, guardian or grandparent of the borrower. 

Can you be a guarantor if you have a mortgage on a property? 

You can act as a guarantor for someone even if you have a mortgage on your main residence. However, the lender will access your, the guarantors, disposbale income after any existing mortgage payments as part of their overall affordability calculations. 

Who are guarantor mortgages suitable for? 

Guarantor mortgages are especially useful for first time buyers but not exclusively. They give the borrower the opportunity to improve the affordability of the overall mortgage application which means the arrangement could help you if:

• You have a low income
• You want to purchase a property that costs more than lenders will give you on a typical mortgage

How does it work?

1. Borrower applies for a mortgage. 

2. Guarantor’s finances are assessed. 

3. Both parties sign the agreement. 

The guarantor isn’t a co-owner but provides financial backing. If the borrower defaults, the guarantor is legally required to make payments.

What Happens if You Default on Your Payments?

The main risk for a guarantor mortgage 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 and the lender could ultimately repossess your property.