Guarantor Mortgages and Borrowing Limits

Getting approved for a mortgage can be challenging, but having a guarantor can make all the difference. Whether you’re struggling with a low income, no deposit, or other financial hurdles, a guarantor mortgage could be the key to securing your dream home.

This guide explains how guarantor mortgages work, how much you might be able to borrow, and how a broker can help you get approved.

For all our content on this topic, visit our dedicated guarantor mortgages page. If you’re new to the market, you may also find our first-time buyer mortgages Hub and mortgage application hub helpful for additional advice and support.

What is a guarantor mortgage?

A guarantor mortgage can help borrowers purchase a home if they have no deposit or their financial circumstances would normally put a lender off.

Also known 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.

The role of the 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.

There are 2 types of a guarantor:

Whole loan guarantor: This is the most common. Most lenders will require the guarantor to accept responsibility by providing cover for the whole of the mortgage. This means that the parent guarantor would have to be able to prove they can afford the entirety of the loan. If a borrower requires a mortgage of 140k but can only prove to afford 110k, the guarantor would still need to have ample income to cover the whole 140k. This may not be possible for some guarantors, especially as the lender will also take into account any other outgoings such as their own mortgages and other credit commitments.

Shortfall guarantor: Rare, but a possibility with some lenders, a shortfall guarantor will be required to cover the surplus or remaining amount that the borrower can’t afford. For example, if a borrower needs a mortgage of 140k, but can only afford 110k, the guarantor would have to prove that they can afford the outstanding 30k.

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 a 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.

Can you get a bigger mortgage with a guarantor?

Yes, it’s possible that a guarantor can increase the amount you can borrow on a mortgage. Usually, the main reason for wanting a guarantor mortgage is because you have a low income, or sometimes none at all, and otherwise wouldn’t be able to borrow what you need.

With a guarantor mortgage, the mortgage application is assessed on the basis of your guarantor’s income, so you’ll be able to borrow more than you would on your own.

How much could you borrow?

As with any kind of mortgage, this depends on several factors and is never a one-size-fits-all answer. Even though they won’t have a stake in the house, your guarantor will be assessed as they would for any mortgage application. So, their income, financial commitments, age, and credit history will all be considered.

Most lenders will cap the maximum loan amount at 4.5 times your guarantor’s income, although in some cases, you might be able to get 5 times or more, depending on the lender and your broader financial picture.

With a guarantor supporting you, your chances of securing a higher income multiple could be greater than if you were applying on your own.

Use the calculator below to get a rough idea of your maximum borrowing.

How a broker can help with a guarantor mortgage

If you’re looking for a guarantor mortgage because you’re on a low income and struggling to find a lender, then the support of a broker who specialises in this type of home loan will be invaluable. They’ll be able to examine your personal finances, discuss all your options, and advise you on anything you could do to make yourself a more attractive proposition to lenders.

Although it can feel impossible, there are actually many ways to get on the property ladder with a low income. A specialist broker with access to the whole mortgage market will be able to find you both the best product and the best rates for your situation, helping turn your property ownership dreams into reality.

If you get in touch, we’ll arrange for a guarantor mortgage specialist we work with to contact you directly for a free, no-obligation chat.

Some of the lenders available

The following UK lenders are among those who are known to offer guarantor mortgages…

• Bath Building Society
• Kent Reliance (Subject to affordability and the age of the guarantor)
• Vernon Building Society (Borrower must be able to afford 70% of the mortgage payments)
• Swansea Building Society

Eligibility requirements

Most lenders will determine affordability and eligibility based on the following factors:

• Income and how the borrower is employed: The more you earn, the better; however, having a guarantor can offset the risk if the borrower has a low income. Those who are self-employed or supplement their income with things like regular bonuses and commissions 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 may mean you do not need to stump up any deposit.
• Credit rating: Borrowers with poor credit ratings may need to find a specialist lender to ensure they get 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 can borrow.

Can you get a 100% mortgage with a guarantor?

Yes, it’s possible. 100% mortgages have become far less popular over the last 20 years because of the risk involved in having no deposit, so nowadays, they tend only to be offered if you have a guarantor.

There are a few ways to use a guarantor to get a 100% mortgage. Often, it involves a charge against the guarantor property as security, but there are a couple of other ways of doing it:

• A family deposit mortgage is when the guarantor puts up savings as security instead of a charge against their property. The cash is put into a savings account until the agreed-upon mortgage amount has been paid off; at this point, the guarantor gets their money back with interest.
• A family offset mortgage – where the guarantor’s savings reduce the total loan amount. A family offset mortgage can either work by reducing the loan term or your monthly repayments.

Not all lenders will offer a 100% guarantor mortgage, so it’s worth speaking to a specialist broker about your options.

Other ways to stretch your maximum borrowing

Suppose you’re uncomfortable with a guarantor mortgage or don’t have someone to act as a guarantor. In that case, there may be other alternatives to increase your borrowing limit and potentially get a bigger mortgage.

In the first instance, check with your broker to see if there are small things you could do to increase your borrowing power, like clearing existing credit commitments or improving your credit rating. If you’re in a secure, long-term job and it’s appropriate timing, you could consider asking for a pay rise.

Offering a bigger deposit can also help you get a bigger mortgage. If you don’t have the money available for this but have a close family member who is in a position to help with a cash lump sum, you could also consider a gifted deposit.

Get matched with a guarantor mortgage specialist

Working with a broker specialising in guarantor mortgages is key if you want to maximise your borrowing potential. They will have the experience and contacts you’ll need to stretch your budget as far as possible and, all well, secure a property you love. They’ll be able to negotiate rates and find you the best deal – every penny counts when you’re on a tight budget.

Call us now at 0330 818 7026 or enquire, and we’ll quickly assess your needs and match you with a broker who will understand your circumstances and help you get the mortgage you need. We have vetted all the advisors we work with so you can speak to them confidently.