What is a guarantor mortgage?
A guarantor mortgage can help a borrower purchase a home if they have no deposit or their financial circumstances would normally put a lender off. Also know as a family-assisted mortgage, these agreements typically require a family member to act as a guarantor for the mortgage, which means they must step in to make any payments if the borrower cannot do so.
What is the role of a guarantor?
The person acting as guarantor for you takes partial responsibility for your mortgage. This means that they may be liable to make any mortgage payments you can’t meet.It also means they will either need to secure the home loan against a property they already own or place a lump sum into a savings account held by the lender – read on for more information about this.
How does it work?
If you’re taking out a mortgage with a guarantor, the person acting as your guarantor will need to be named on the title deeds. They will not own a share of the property but must sign a legal agreement to make any mortgage payments if you, as the borrower, fall behind. A guarantor for a mortgage may also have to put up security to safeguard the loan, which could be a property or some of the equity they already own.
What security is required?
Based on the lender’s requirements, a guarantor for a mortgage may have to secure the loan against either:
- A property of their own The lender will hold a charge on the security property, meaning the guarantor of the mortgage could potentially lose it through repossession if the borrower misses too many payments.
- Their savings. The mortgage loan guarantor places a lump sum from their savings into an account held by the lender. They cannot withdraw from this pot for a set number of years (usually between 3 and 5) or until a certain amount of the mortgage loan has been repaid. Savings will usually accrue some interest while held in the lender account.
For further advice on getting a mortgage with a guarantor, or to get the ball rolling on an application for one, get in touch. We’ll match you with one of the whole-of-market brokers we work with. With access to the entire market, they will be able to answer all your questions and ensure you get the right mortgage solution at the best available price.
Why get a guarantor mortgage?
There are a number of scenarios where mortgages with a guarantor can offer a lifeline to borrowers who would otherwise struggle to find credit, such as:
- When a borrower has insufficient or no deposit
- They are a first-time buyer
- They have low income
- They want to buy a home they could not afford without support
- The borrower has a poor credit rating
How do I get a guarantor mortgage?
Getting a mortgage with a guarantor is no different from applying for any other mortgage product, although you will obviously need to get a family member or close friend onboard with your plan before you make your application. From there, the best course of action is to find a broker with access to every guarantor home mortgage lender on the market. If you do this, you can be certain all of the best guarantor mortgage deals you’re eligible for will be available to you.
Can I get one with no deposit?
Yes, if you don’t have any deposit to put down, it’s possible to get a 100% mortgage with a guarantor supporting you. Some mortgage lenders will offer 100% loan-to-value (LTV) deals, as long as your guarantor meets their eligibility and affordability requirements. Guarantors need to have adequate equity in their own property or savings they are willing to deposit as security. We discuss this further in the section below. Many borrowers use a guarantor instead of a deposit. In fact, you’re unlikely to get a 100% mortgage with no guarantor as these products aren’t usually offered under other circumstances. However, should you have a low deposit, there may be alternatives you can consider.
Can I get a guarantor mortgage with 95% LTV
This is certainly possible, providing you and your guarantor pass the lender’s checks. With a 5% deposit available, you could take out a 95% LTV guarantor mortgage, provided you could find a lender offering a deal like this and you passed all their criteria and affordability checks. Since the deposit would be taken care of, having a guarantor on the mortgage would help you pass the affordability checks for the loan itself, or enable you to borrow more than you would without the support of a guarantor.
Can I be a guarantor for my son or daughter’s mortgage?
Yes, you may be able to support your child through a guarantor mortgage as a parent. However, most lenders have eligibility requirements for guarantors that you’ll need to meet.
Parent guarantor mortgage requirements include:
- Owning their own property. This is not a strict requirement of all lenders, but those that do require the property to either be owned outright or they must at least have sufficient equity in it. Some lenders expect a guarantor to own a minimum of 30% of any property they’re putting up as security.
- Have high enough income. The lender will want to see that the guarantor has the means to cover the mortgage payments if the borrower defaults.
- Have a clean credit rating. This will help convince the lender that you’re financially stable and able to step in if the borrower defaults.
Are parental guarantors responsible for 100% of the mortgage?
Most of the time, yes, but it’s not always the case. A guarantor mortgage may leave the parent responsible for paying a percentage of the debt if their child defaults, depending on the agreement the borrower negotiates with the lender when taking out the loan. Some mortgage providers might consider lending 100% of a property’s value on parental guarantor mortgages, but allow the guarantor to take responsibility for only a percentage of the loan in the event of a default. For example, if you’re buying a property worth £100,000 and your mortgage lender has agreed that your guarantor will be responsible for clearing 50% of the debt if you’re unable to, the mortgage provider would take a charge of £50,000 on the security property.
What is a family guarantor mortgage?
These work in exactly the same way as parent guarantor mortgages. The only real difference is that it might be another family member acting as guarantor, rather than one or both parents.Some lenders will only allow a parent, grandparent or step-parent to act as a guarantor. Others are more flexible and will approve siblings, other relatives and even close friends, but these deals are obviously harder to come by. You should also be aware that some mortgage providers might use the term ‘family guarantor mortgage’ to describe a deal where only a parent can act as the guarantor.
How to get the best interest rates
Mortgage rates often fluctuate and can change at any time, but there’s a way you can ensure that you’ll end up on the best ones available to those using a guarantor.First off, you need to have access to the entire market to make sure the most favourable deals you qualify for are within reach. Secondly, you should try to meet the guarantor mortgage eligibility criteria with as many lenders as possible…
Guarantor mortgage eligibility requirements
Guarantors on mortgages have eligibility requirements that they must satisfy, but the borrower themselves need to meet the lender’s standard mortgage criteria too. Most lenders determine affordability and eligibility based on the following factors:
- Income and how the borrower is employed. Obviously, the more you earn, the better; but having a guarantor can offset the risk if the borrower has low income. Those who are self-employed or supplement their income with things like regular bonuses and commission may need a specialist lender.
- Deposit. The minimum deposit requirement is usually 5% for a residential property or 15% for a buy-to-let. However, having a guarantor means you may not need to stump up any deposit.
- Credit rating. Borrowers with a poor credit rating may need to find a specialist lender to ensure they end up with the best rates.
- Age. Some mortgage providers have strict upper and lower age limits.
- The property type. A specialist lender might be needed if the property you’re buying has ‘non-standard’ construction(e.g. thatched roof, timber frame).
- The borrower’s outgoings. Significant outgoings, such as other outstanding loans or dependent children, can affect the amount you’re able to borrow.
For further information about getting the best UK guarantor mortgages rates, make an enquiry and an expert broker will discuss eligibility with you over the phone and connect you with the best lender to fit your needs and circumstances.
Can I get a guarantor mortgage with bad credit?
Yes, guarantor mortgage lenders don’t usually treat bad credit mortgage applications any differently to other types of lenders. If the borrower’s credit rating is considered too poor for any provider to take on, having a guarantor behind them is unlikely to make a difference. That said, the advisors we work with can connect you to lenders who are more than happy to cater for customers with the following on their file, regardless of whether they have backing from a reliable guarantor…
- No credit history
- Low credit score
- Late payments
- Missed mortgage payments
- Debt management schemes
- Payday loans
- Multiple credit problems
While some lenders (mainstream ones, in particular) might offer you unfavourable rates or turn you away entirely if any of the above is against your name, a specialist mortgage provider might take the severity and age of the credit issue into account, as well as how closely you meet their other eligibility requirements.
What are the age limits?
Some mortgage lenders only accept applicants who are over 21, so a specialist provider might be called for if you’re younger than that. At the other end of the scale, if you’re a senior borrower, certain lenders might be okay with another relative acting as your guarantor – although these deals are more difficult to come by (due to fewer lenders and stricter eligibility) since some providers prefer the guarantor to be a parent, grandparent or step parent. If you’re aiming to borrow into your retirementwith the help of a guarantor, take note that some lenders won’t offer mortgages to anyone over 75, others will go up to 85 and a minority will lend to a retiree of any age, under the right circumstances.
Are there guarantor mortgages for over 70s?
In theory, yes. Although some lenders will only accept parents, grandparents or step-parents as guarantors, others are more flexible and may consider allowing other family members, or a close friend, to act as a guarantor for an elderly borrower. Be aware that some lenders impose age limits for all mortgages and won’t cater for anyone over 75. Others go up to 85 and a minority will demand no upper age limit if they’re confident you can continue paying the mortgage during retirement. If you are an older borrower looking to use a younger guarantor, perhaps to help with affordability in borrowing money on a property you own, it may be more sensible to consider equity release with a lifetime mortgage.
What is the maximum age for a mortgage guarantor?
Some lenders also set age limits for a guarantor on a mortgage. While other providers have no maximum age for the guarantor but may ask that the loan finishes by the time they’re 75 or, sometimes, 80.
Are there guarantor mortgages for first-time buyers?
Yes, absolutely. In fact, some lenders will only offer you a mortgage with a guarantor clause if you’re a first-time buyer. Certain providers limit these deals to customers who are buying their first home and will not approve them for those who are remortgaging or moving house. Guarantor mortgages are often a good fit for first-timers who may have limited income or might be struggling to find a deposit.
Can you have a guarantor on a Help to Buy mortgage?
Not usually. Government schemes such as Help to Buy, Right to Buy and Shared Ownershipcannot be used with a guarantor mortgage as far as the vast majority of lenders are concerned. However, there may be other options available if you’re struggling to meet a lender’s affordability requirements and qualify for any of these schemes, such as adding another person to the mortgage in the traditional sense.
Are there guarantor mortgages for first-time buyers with bad credit?
Yes! Guarantor mortgages are aimed specifically at first-time buyers and some providers may overlook any bad credit on your file as long as your guarantor passes their eligibility and affordability checks. The lending decision may, of course, be based on other factors too, such as the severity of your credit issues.
How much can I borrow?
If you’re using a guarantor, the lender will use a guarantor mortgage calculator to work out how much you can afford to borrow. They will use data such as your income, your credit rating and your guarantor’s financial situation to calculate your affordability. However, lenders tend to use different ways to calculate your affordability so the outcome isn’t necessarily the same with every lender. Most mortgage lenders will offer eligible borrowers a mortgage based on 4x their income, some will go to 5x and a minority 6x under the right circumstances. If these multiples don’t stretch far enough, the provider might be flexible and lend you more if a friend or close family member has agreed to act as guarantor. Although you would generally need fairly exceptional circumstances to achieve this. For example, if you were eligible for a £150,000 mortgage outright, with a guarantor onside, a lender might be willing to lend you £180,000, although the exact amount of extra capital you qualify for may vary from one provider to the next.
Can I get a guarantor mortgage anywhere in the UK?
Technically, yes, but there are a few caveats. Guarantor mortgage providers operate all over the UK, but some postcode restrictions on certain places in Wales, Scotland and Northern Ireland. Therefore, guarantor mortgages might be harder to come by in Scotland if the property you’re buying is in the Highlands or off the mainland, for instance. However, there are specialist guarantor mortgage lenders in Scotland, Wales and Northern Ireland who might be able to offer you a lifeline where others can’t.
Guarantor mortgage FAQ
Customers who are thinking about using a guarantor to secure a mortgage or are considering acting as a guarantor often ask us the following questions:
Does having a guarantor help get a mortgage?
It can help if you are struggling to get a mortgage due to having an insufficient deposit or when your income doesn’t stretch far enough to pass the lender’s affordability checks. With a guarantor behind you, a lender might be willing to offer you a mortgage based on 100% of the property’s value or agree to let you borrow more.
Can I borrow more on my mortgage with a guarantor?
Some lenders will allow this, yes. A number of providers will offer 100% LTV deals to borrowers who are using a guarantor, and others may allow you to borrow a larger amount if your income doesn’t stretch far enough to cover the mortgage.
Does being a guarantor affect me getting a mortgage?
It may do. The act of becoming a guarantor will not usually impact on your credit rating. This will only be affected if the borrower defaults and you’re unable to pay the debt for them. Generally, your guarantor duties will be taken into account when your affordability is being calculated, which may reduce the amount you can afford to borrow even though you are not technically making any payments, regardless of how well conducted the mortgage is by the owner.
Should I take out insurance if I’m acting as a guarantor?
A guarantor on any home mortgage loan might want to consider taking out income protection insurance. Doing so will ensure you are covered in the event of the borrower defaulting and of you being unable to cover the debt due to things like illness, injury or redundancy. It may also be a good idea to convince the borrower to take out similar cover themselves to help protect their position and, by default, your own.
Can I get a self-employed mortgage with a guarantor?
Yes, there are guarantor mortgages for self-employed borrowers, but a specialist lender might be needed to ensure you end up on the most favourable rates. The way mortgage lenders treat self-employed income, including the amount of it you can declare and how long they need you to have been trading for, can vary greatly, so it’s important to find the lender with the most accommodating approach to your specific employment situation. >Having a guarantor can help you get a mortgage with no deposit and borrow more than you could otherwise afford, but a href=”https://www.onlinemortgageadvisor.co.uk/enquiry/general-sf/”>specialist advice from a whole-of-market broker is what will help you find the best rates when you’re self-employed.
How long does a guarantor stay on a mortgage?
Your lender decides this and you will not be able to remortgage to a non-guarantor deal until they give you the go-ahead. A guarantor would usually stay on the mortgage for an agreed number of years or until a specific amount of the debt is paid. If you miss any repayments, this term may be extended by the lender.
How many guarantors can you have on a mortgage?
The maximum number of guarantors most lenders will accept on a mortgage is two, and the majority of providers will insist that they are the parents, grandparents or step-parent(s) of the borrower.
How do I remove a guarantor from a mortgage?
Whether you’re successful in removing your guarantor (assuming they’ve agreed to be removed) might come down to why you want to cut this tie. You will need to convince the lender that you have a legitimate reason, such as your financial situation changing for the better or the guarantor passing away. If you open talks with your lender and tell them you wish to remove your guarantor, they will likely offer you one of the following options, depending on the circumstances:
- They will let you remove the guarantor altogether
- They will expect you to replace the guarantor with another
- They will ask you to pay off the loan or refinance it
- If your guarantor has died, they may allow you to use some of their estate to pay off part of the mortgage
- They will reject your request and refuse to allow you to remove the guarantor or change the terms of the loan
Can I get a student mortgage if I have a guarantor?
Specialist lenders have been known to offer student mortgages on the condition that they have a guarantor. Because students often have limited or no income in the traditional sense, this often means asking the guarantor to take responsibility for 100% of the debt, which is possible, as long as the guarantor is eligible. It’s possible to get a guarantor mortgage without the borrower providing any proof of income, with the eligibility and affordability checks falling solely on the guarantor. This gives student borrowers a potential path to the property ladder and an expert broker with access to the entire market, like those we work with, is essential in these niche situations.
Can I get a guarantor on a second mortgage?
In theory, this is possible, but your choice of lenders will be restricted as many providers only offer guarantor mortgages to first-time buyers.
Is a guarantor mortgage the same as a springboard mortgage?
Yes! Some lenders have a different name for these products, calling them either family mortgages or springboard mortgages, though they’re the same thing.
Who offers guarantor mortgages?
Some of the UK’s mainstream lenders, including banks and building societies, will consider offering guarantor mortgages under the right circumstances. Specialist lenders who cater for niche borrowers with things like bad credit against their name can also provide these products. The market is vast, so specialist advice from a broker with access to the whole market is a good way to ensure you’re getting the best possible rate on your guarantor mortgage.
Why seeking specialist advice is important
It’s important to have access to the whole of the market to make sure you’re paired up with the right lender based on your needs, goals and circumstances. Approaching a mainstream provider isn’t always the best option, for a number of reasons. These include (at the time of writing):
- If you were to approach Halifax for a guarantor mortgage, you would be turned away as this bank withdrew guarantor mortgages back in 2010
- Guarantor mortgages are also not available through Natwest
- Santander does not offer guarantor mortgages
- HSBC does not offer guarantor mortgages
- Virgin Money does not offer guarantor mortgages
- >Lloyds no longer offer guarantor mortgages
- Nationwide guarantor mortgages usually come with strict underwriting criteria and a capped loan to value (LTV) ratio of 85%
- Barclays’ take on a guarantor mortgage is a family springboard deal which requires the guarantor to place a 10% deposit in a savings account, which won’t help you out if your guarantor only has a 5% deposit to contribute or your income is low
- Aldermore guarantor mortgages require the guarantor to be no older than 70 at the end of the guarantee period – a specialist lender may have a more flexible approach to age requirements
Given that you will encounter restrictions at some of the UK’s mainstream lenders or will be turned away by default, finding a broker with access to the whole market who can compare guarantor mortgages and connect you to the right provider is the best course of action.
Speak to an expert
If you have questions and want to speak to an expert for the right advice, call us on 0808 189 2301 or make an enquiry for a no obligation chat. We’ll match you with an advisor who can find the best deals based on your circumstances via their ‘whole-of-market’ access – some of which may not even be available to the public.