Guarantor mortgages in the UK

With things now picking up in the market, we are getting a lot of enquiries about guarantor mortgages from potential home owners looking to purchase a property for the first time, most of whom are asking for 2 reasons:

  1. Because they can’t afford the mortgage they want on their own income, or
  2. Because they don’t have the deposit to put down and are looking for ways to buy without one.

If you are looking for a mortgage with little/no deposit and wondering what options are available for friends/family members to help out then please visit the low deposit mortgages page for more info. If you have deposit and are looking for mortgage help then read on…

The definition of a guarantor

In the financial world, a guarantor usually means a person who is willing to provide additional guarantees to the lender on behalf of a borrower, so if the borrower doesn’t pay the guarantor will be legally responsible for making the repayments. For products such as personal loans and other unsecured borrowing, these are common when the borrower has bad credit and only a specialist lender would consider the application.

A guarantor for mortgage purposes usually makes little/no difference if the main borrower has bad credit – if the credit history is too much for any lender to take on then the addition of a guarantor won’t usually help (visit our bad credit pages for more info). A guarantor mortgage is primarily used when the borrower has insufficient income to support the loan they require.

So for instance, first time buyers James and Michelle both work and earn £35k between them, and have found the perfect house for £300k. They have a 10% deposit (£30k), but being on £35k income the maximum they can borrow is £175k (5x income), so they’re £95k short. Luckily Michelle’s dad is minted earning £90k a year and has no other mortgages. Most guarantor lenders will use just Michelle’s dad’s income, and as such the mortgage will be deemed easily affordable (5x income = £450k max).

Guarantor mortgage rates for 2016

Not every mortgage product can be taken on a guarantor basis, actually, there is a separate market of guarantor products that some lenders offer, where other lenders don’t do guarantors at all. Below is today’s best rates table, but to have the scope of the market you’d be best served talking to an expert by making an enquiry.

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