If you have a limited budget or are struggling to get accepted for a mortgage, a guarantor mortgage could be a great solution.
With a guarantor mortgage, the lender will approve your application on the basis that you have another person support your application. This is often a family member or friend who agrees to cover the mortgage costs if you cannot afford to repay the loan.
This acts as a safety net to assure lenders you will not default on your monthly repayments – removing risk and making them more willing to approve your application.
What is a guarantor mortgage?
A guarantor mortgage is when lenders approve a mortgage based on having the support of another person as a key part of the application. A guarantor will often be a close family member, such as a parent, who offers to support your mortgage application.
In this instance, they will usually agree to use their home, savings or other assets as collateral for the loan. They will take on responsibility for the mortgage, if the buyer is unable to repay the amount borrowed for any reason.
This can enable buyers who could struggle financially to be approved for a mortgage when they may otherwise find this difficult. This can be beneficial for first time buyers with a low income, those with a poor credit history or someone who has had an application declined for other reasons.
How does a guarantor mortgage work?
With a guarantor mortgage, a trusted person such as a close family member or friend will agree to support your mortgage application. This can help those struggling to get a mortgage on their own to get their application approved.
There are two types of guarantors when it comes to these mortgages:
- Whole loan guarantor: This means the guarantor needs to prove they have enough income that they can cover the whole mortgage amount if necessary. Lenders will also assess other factors, such as if the guarantor has their own mortgage or other large outgoing expenses.
- Shortfall guarantor: In some cases, a lender may agree to a ‘shortfall’ guarantor. This allows a buyer to take out a larger mortgage than what they could afford alone e.g. a £120,000 mortgage when they can only afford £100,000 and the guarantor covers the £20,000 difference.
Can you get a mortgage with a guarantor?
Getting a mortgage can be a much easier process in certain cases if you have a guarantor in place. A lender may prefer you to have a guarantor if you:
- Have poor credit history or outstanding debts
- Have a low income
- Cannot save enough deposit for the property you want
- Need additional support to buy a more expensive property
A guarantor mortgage can be very useful for first time buyers as they may have limited funds or lower credit scores.
The lender will also assess the guarantor before approving their support for your application. They will look at factors such as:
- Having sufficient income or assets to cover the mortgage amount
- No debt or poor credit history
- Do they have large expenses of their own? e.g. a mortgage or other secured loan
If you are unfamiliar with the general mortgage application process, learn more with our helpful guide.
Mortgage advice for guarantor mortgages
Our main advice when it comes to guarantor mortgages is to make sure you choose a guarantor you trust to support you with such a long term commitment. This is a main reason why people will often choose close family members.
You need to make sure your guarantor is aware and comfortable with the potential risk of supporting your mortgage. Often their home will be used to secure the loan. This property can then be at risk of repossession as well as your own home if you both cannot afford to repay the mortgage.
It can be worth seeking legal advice to ensure you have a proper agreement in place with your guarantor. It is also worth assessing whether another mortgage type could be a viable option for you to avoid needing a guarantor.
There are other great choices for buyers who may need extra support for their purchase. This includes shared ownership mortgages, joint mortgages or even taking advantage of government backed help to buy schemes.
Who offers guarantor mortgages?
Not all mortgage providers will offer guarantor mortgage deals as standard. There are however several great lenders currently operating that are willing to offer guarantor mortgages. This includes some high street lenders such as Barclays and Nationwide as well as smaller more specialised lenders.
As this type of mortgage isn’t always as accessible, it is usually worth speaking to a mortgage specialist for advice. This ensures you can find the right lenders and saves the unnecessary time and hassle of searching across lenders yourself.
An independent expert will be able to search the market on your behalf to find the right deal for you.
Best guarantor mortgages
The key to finding the best mortgage for your needs will always be to assess what you want in terms of length of mortgage type, interest rate etc and then compare the available deals across the market.
Our mortgage experts can compare pricing across over 50 top UK lenders to find you the most competitive rates. Speak to our team for advice on the best choices available for your guarantor mortgage.
Will being a guarantor affect me getting a mortgage?
If you have been a guarantor for someone else’s mortgage, you may worry if this will then affect you taking out a new mortgage or remortgaging your property.
If you have acted as a guarantor but have never needed to take over repayments, there should be no impact on your application from this. This will be the case for most guarantors.
If you have had to take over the mortgage payments this can be more complicated. As long as you have been able to continue the repayments your credit record should remain unaffected.
However, if you have struggled with the extra expense and been unable to make payments this can impact your credit score – and the way lenders will assess your mortgage application.
It is worth speaking to a specialist mortgage advisor in this situation, as they will be able to offer expert support and guidance.
Guarantor mortgage bad credit
Guarantor mortgages can be a great solution for those who would otherwise struggle to get a mortgage due to a history of poor credit or debt.
Someone else with sufficient income or savings account/assets to cover the mortgage agrees to support you in your repayments if needed. This can make mortgage providers who would usually be wary of lending to you more likely to approve your application.
If you have struggled to get a mortgage due to bad credit, speak to a mortgage expert for advice. Our team have years of experience in both guarantor and poor credit mortgages, meaning we are ideally placed to help in this situation.
Learn more about how you can still get a great mortgage with poor credit.
Mortgage specialists for guarantor mortgages
Our team of mortgage experts has years of experience in helping buyers find great deals for their mortgage. This includes helping buyers who are struggling to get accepted who then need a guarantor to boost their application.
We can offer extensive advice and support to both buyers and their guarantor throughout the whole application process. With a big commitment like a mortgage, it is best to know you are getting quality advice about the best lenders and deals for your needs.