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Guarantor Mortgages - FAQs and Everything You Should Know

Posted 6 November 2017

If you have a friend or family member willing to help you buy a home, a guarantor mortgage could be the perfect solution...

Getting onto the property ladder can be tough if you don't have a large deposit, or your income isn't enough to borrow what you need.

If you have a family member or a friend prepared to help, then you could consider a guarantor mortgage. Taking out a mortgage with parents is increasingly common, so keep reading for everything you need to know about taking out a mortgage with a guarantor.

What is a guarantor mortgage?

Many parents want to help their children onto the property ladder and if you have a family member or friend willing to help you buy a home, a guarantor mortgage could be the perfect solution.

Under a guarantor mortgage, a family member or a friend guarantees the mortgage debt. This means that if the borrower misses their repayments, the guarantor will have to pay them. The guarantor is responsible both for the monthly payments and the total mortgage debt.

While the guarantor's income is used as part of the borrowing assessment, the guarantor does not generally go on the property deeds and they are therefore not a legal owner of the property.

If you have a guarantor prepared to take on some of the lending risk – particularly when considering guarantor mortgages for first-time buyers – lenders are prepared to advance a larger mortgage, often at a better interest rate, than they ordinarily would.

You should remember that guarantor mortgages come with risks for both the borrower and the guarantor. It's therefore important that you consider a guarantor arrangement very carefully to see if it is the right choice for you.

The potential guarantor should also consider taking independent legal advice so they know their responsibilities under the arrangement. Some lenders will insist that legal advice is taken.

How guarantor mortgages work

There are lots of different types of guarantor mortgages on the market. Typically, a guarantor mortgage requires the borrower to put down a deposit, although if the guarantor is prepared to use their own property as security then this might not be required.

The guarantor then provides a 'guarantee' either for the whole mortgage or, in some cases, for the amount above 75 or 80% of the value of the home.

If the borrower fails to make their repayments, the guarantor is responsible. If the person guaranteeing the mortgage has offered their own property as security and the repayments are not met, in theory the guarantor could lose their home to cover the debt.

However, if all payments are paid on time, it won't cost the guarantor anything.

What is the role of the guarantor?

The guarantor is in place to provide a guarantee that the mortgage will be paid if the borrower fails to meet their commitments. They will be contractually obliged to meet the payments if the borrowers falls behind.

The lender will want to see evidence that the guarantor can cover the mortgage payments as well as their own outgoings (including their own mortgage if they have one). Some lenders will also take a legal charge over the guarantor's assets (for example their home).

How do I become a guarantor? And what do I need to provide?

If you are considering becoming a guarantor, you should be sure that you know what you are agreeing to. In the worst case scenario you could find yourself in financial difficulty if you have to pay the new mortgage as well as all your own outgoings. If you have offered your home as security you could also lose your property.

You will have to evidence to a lender that you can afford both the new mortgage payments and all your existing commitments. You may have to provide your income through payslips or accounts and you will generally have to provide bank statements to demonstrate affordability.

Generally speaking, a guarantor will have to:

  • Own their own property outright or have significant equity in it.
  • Earn enough to help cover both the new repayments and their own outgoings.
  • Have a good credit record.

Can I be a guarantor for two people?

In theory, you can be a guarantor for more than one person. However, you have to be able to prove that you can afford all the mortgage commitments as well as your own outgoings.

A lender may also require a legal charge on your home and so a subsequent lender may not be prepared to be second in line if a claim against your home has to be made.

How long is the guarantor liable?

Becoming a guarantor is a long-term commitment. Generally speaking the guarantor will not be released from the mortgage until:

  • The borrower can demonstrate that they can afford the mortgage on their own (perhaps their income has increased).
  • The 'loan to value' of the mortgage drops below a specified amount – this is typically 75 to 80%.
  • The loan is repaid.

Can my parents guarantee my mortgage?

Yes. A family member can be your guarantor, but some lenders will restrict who you can choose. For example, some lenders will only accept a parent, grandparent or step-parent as your guarantor.

Can a friend be a guarantor?

Yes, depending on the lender. Some lenders will not accept friends as guarantors.

Bear in mind that if you do not meet your commitments, your friendship or family relationship could be damaged.

How to get a guarantor mortgage? And who offers guarantor mortgages?

There are lots of different types of guarantor mortgage lenders in the market. Many of the main high street lenders offer mortgage with a guarantor. Rules differ from lender to lender and so you should shop around to find the most appropriate deal for you.

Speak to an independent mortgage broker. They know the market and so can find the right guarantor mortgage provider for your circumstances.

What happens if you miss a payment?

Lenders all have different ways of dealing with missed repayments on a guarantor mortgage. Generally speaking they could:

  • Give you time to bring your repayments up to date.
  • Ask the guarantor to make the repayment.

If you fall further behind with your repayments they could eventually repossess your home to get back the money that you owe them. If you still owe money then they could even repossess your guarantor's home.

How do I remove a guarantor from my mortgage?

A guarantor can only be released from the mortgage when the borrower is in a position to cover the mortgage on their own, or when the loan is repaid.

Some lenders will allow a guarantor to be removed when the 'loan to value' falls below 75 or 80%.


If you have any queries, or want to know anything else about guarantor mortgages, leave us a comment below.
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