Can a Parent Be a Guarantor on a Mortgage?

Yes, a parent can indeed act as a guarantor on a mortgage, and it's a common arrangement in many mortgage applications, particularly for first-time buyers or individuals with limited credit history or income. 

While there’s no specific product called a “parent guarantor mortgage”, a lot of lenders actually prefer guarantors to be parents or other family members. Different lenders have different criteria for mortgage guarantors regarding their relationship to the borrower, the guarantor’s age, income and whether they have a mortgage on another property.   

What Is a Guarantor Mortgage? 

Guarantor mortgages are typically straightforward repayment mortgages, which are secured against the property you – or your child – is purchasing. The buyer puts down a deposit and pays back part of the mortgage balance each month, with interest. What’s special about them is that they allow parents – or other relatives – to act as guarantors for the borrower without being added to the title deeds. 

When you act as guarantor for a mortgage, you guarantee to meet the mortgage payments if the borrower can’t. 

The guarantor is assessed like a full mortgage applicant, which means the lender takes the guarantor’s income into account, alongside the borrowers, when considering the application. 

It’s worth noting that when you act as guarantor, you don’t need to put down any deposit and no charge will be added to your property; the mortgage is only secured against the property your child is using the loan to purchase. 

Who Are Guarantor Mortgages Useful for? 

Guarantor mortgages are useful for: 

• First-time buyers and people with low incomes 
• Someone who wants to purchase a property that costs more than they can afford on a typical mortgage 

Here's how it typically works: 

1. Guarantor's role - guarantor agrees to take on responsibility for repaying the mortgage if the primary borrower defaults on payments. Essentially, they're providing additional security for the lender by pledging their own assets or income to cover the mortgage debt if necessary  
2. Eligibility - lenders typically have specific criteria for guarantors. They'll need to assess the guarantor's financial stability, creditworthiness, and ability to meet the mortgage repayments if required. Generally, a guarantor should have a stable income, a good credit score, and sufficient assets to cover the mortgage amount if needed  
3. Parental guarantor - parents are often chosen as guarantors due to their financial stability and willingness to support their children's home-buying aspirations. As a guarantor, a parent's income, assets, and credit history will be evaluated by the lender during the mortgage application process  
4. Legal obligations - it's important for guarantors, including parents, to understand the legal obligations they're undertaking by acting as guarantors. They'll be required to sign legal documents, such as a guarantor agreement, and they'll be legally liable for the mortgage repayments if the primary borrower defaults  
5. Impact on parent's finances - parents should carefully consider the potential financial implications of acting as guarantors. If the primary borrower defaults on payments, the guarantor may be required to cover the mortgage repayments, which could affect their own financial stability and creditworthiness  
6. Exit strategies - guarantor arrangements are often temporary, with provisions for the guarantor to be released from their obligations once certain conditions are met. For example, the guarantor may be released from their obligations once the primary borrower has built up sufficient equity in the property or has established a strong credit history  
7. Legal advice - it's advisable for both the borrower and the guarantor, especially if they're a parent, to seek legal advice before entering into a guarantor arrangement. Legal professionals can review the terms of the agreement, explain the legal implications, and ensure that both parties understand their rights and obligations  

When Isn’t a Guarantor Mortgage Suitable? 

A common issue you may find with a guarantor mortgage is that, even with your help as guarantor for your child, the amount they want to borrow far exceeds what a lender would normally lend to them. This is because the lender would expect the borrower’s earnings to rise fairly quickly, to a level that allows them to take over the mortgage completely and release the guarantor, which lenders don’t always deem to be likely. 

If you’re happy and able to be on the mortgage as a guarantor for the full term, you may want to look at joint borrower sole proprietor arrangements.   

Alternatively, if you own your main residence already – and have plenty of equity in it - you may want to consider letting a lender place a charge on your home to raise the funds for your child to purchase the property. 

Is There an Age Limit for Mortgage Guarantors? 

Lenders have different requirements for who can act as a guarantor. Many enforce an age limit whereby the guarantor mustn’t reach their expected retirement age before the end of the mortgage term. This means the borrower might have to apply for the mortgage before their parent reaches a certain age, if they want that parent to guarantee their mortgage. If your parent is close to the age limit, then it’s likely you’ll have a very short mortgage term which would increase the monthly payments beyond a level you could afford. 

You can find out more in our guide: Guarantor Mortgages Explained. 

Overall, having a parent act as a guarantor can be a valuable option for borrowers who may not meet the lender's criteria on their own. However, it's essential for all parties involved to fully understand the responsibilities and risks associated with the guarantor arrangement before proceeding. Speak with one of our experienced mortgage experts today on 0330 433 2927.