Who can be a Mortgage Guarantor?
Wondering who can be a guarantor for your next mortgage? Whether you're considering a parent, grandparent or even a friend, find out what to do next today!
If you’re considering a guarantor mortgage, (sometimes referred to as a family or springboard mortgage), you’ll no doubt be wondering who can be a guarantor for you.
In this article, we’ll look at who can be a mortgage guarantor, what criteria they’ll need to meet, and how a broker can help you to find a suitable lender.
Can a family member be a guarantor for a mortgage?
Yes, they can. In fact, many lenders prefer this to be the case, and some restrict guarantors to close family members exclusively. This improves their confidence that there won’t be issues with the agreement further down the line, as relationships with parents and grandparents are generally considered the most reliable and trustworthy.
Depending on the lender, however, it’s possible to be a guarantor if you’re related to the applicant in any of the following ways:
- Aunt or uncle
- Any other close blood relative
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What about friends and non-blood relatives?
All lenders have their own criteria concerning who can act as a guarantor for you. High street lenders can be more restrictive, but there are specialist lenders who would potentially accept a variety of people who are not considered close family members or blood relatives, such as:
- Adoptive parents
- Your spouse (providing they have a separate bank account from you)
- Distant relatives, such as great uncles and aunts
- Second or third cousins
Effectively, anyone that you have a strong and trusting relationship with, that is also financially stable, could potentially be a guarantor; it’s just a case of finding a lender who is open-minded about the guarantor’s relationship to the borrower.
How a broker can help with a guarantor mortgage
In this niche of the mortgage industry there tends to be far fewer lenders available, largely because many of them removed their guarantor mortgages from the market when the help to buy scheme became available. If your guarantor happens to be a non-blood relative, this will narrow down your choice even further.
The good news is, the brokers we work with have access to every mortgage lender on the market. They’ll be able to match you with a more flexible lender who will consider guarantors more openly, and help ensure that you secure the funding you need and get the best deal possible.
How old can my guarantor be?
This can vary from lender to lender, and whilst high street lenders often have restrictions on both the maximum and minimum age that a guarantor can be, specialist lenders may be willing to consider guarantors up to the age of 85. There are even a handful that has no upper age limits for applicants or guarantors, although you’ll likely need to go through a broker who specialises in guarantor mortgages to access them.
Some lenders will want the mortgage to be repaid in full prior to the guarantor’s retirement. If your guarantor is approaching retirement age the length of the mortgage term available to you is likely to be restricted, and your lender options will be even more narrow.
A reverse guarantor is younger than the mortgage applicant, and there are certain lenders that will look at this type of arrangement, for example, a child guaranteeing their parents’ mortgage. Where this is accepted, a minimum age limit or maximum LTV (loan to value) may be applicable.
Although a reverse guarantor is certainly a possibility, older borrowers that are struggling to meet the affordability criteria do have other options available to them, such as a lifetime mortgage.
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Other criteria for guarantors
Aside from their relationship to the applicant and age, there are some other criteria that guarantors will need to meet in order to satisfy lenders. These can vary slightly from one lender to the next, but generally includes:
- Security – The vast majority of lenders require guarantors to be a homeowner, however, not all lenders will insist that they own their home outright. Some lenders will consider homeowners with a specific level of equity in their homes. The exact percentage of equity required can vary from one lender to the next and can be as wide-ranging as 30%-70%.
There are some lenders that will consider a guarantor’s savings to secure the loan, rather than property, although typically this is offered either by more specialist lenders. It may also be offered specifically for JBSP (Joint Borrower Sole Proprietor) mortgage applications. A JBSP mortgage is a similar, more modern alternative to a guarantor mortgage, and is now many lenders’ exclusive product of this type.
- Financial stability – All lenders will expect the guarantor to prove that they are financially stable. Generally, it won’t matter whether their income is from employment, self-employment, or savings, so long as they are provable. In some cases retirees will be able to use their pension as proof, however, only specialist lenders are likely to accept retired guarantors.
- Affordability of the repayments – Some lenders will expect the guarantor to be able to support 100% of the repayments on the loan for the entire duration, although some will be satisfied if a minimum percentage is covered, 70% being typical. If they still have mortgage repayments on their own home, they will also need to prove that they can afford both loans simultaneously
- Strong credit score – There isn’t a specific score requirement, but each lender will have their own interpretation of what they consider a good enough credit history to support a mortgage in this way. It’s unlikely that those with a no credit history or severe bad credit will be able to act as a guarantor
- Proof of legal advice – If you’re planning to be a guarantor, it’s essential that you take the relevant legal advice and fully understand the level of risks involved. Some lenders will expect you to provide documented proof that you have taken this advice.
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Can you be a guarantor for more than one mortgage?
Not really. You can support a joint mortgage with two applicants, so long as your relationship to one of them is deemed acceptable by the lender, i.e if they need you to be family.
In the vast majority of cases, however, individuals can only guarantor one loan at a time, especially if it’s a high-value loan such as a mortgage. As soon as the term ends or your minimum commitment to that agreement is met, however, you would be free to act as a guarantor for another person/loan.
Get matched with a guarantor mortgage specialist
Guarantor mortgages present a great option to help someone you care about to afford their own home, however, the criteria that individuals need to meet in order to perform this function are typically stringent, in some cases, more so than they are for the applicant. It’s therefore important to apply for a guarantor mortgage with the ideal lender for the circumstances of both the borrower and the guarantor.
Finding the right lender in this situation can be tricky, especially if your guarantor is not an immediate member of your family. The brokers we work with have expert knowledge in this area and will be able to recommend a lender that can help you, no matter what your relationship to your guarantor is.
Our free broker-matching service will pair you with one of these experts, who can get the ball rolling for you immediately. Their first consultation is always free, and there’s no obligation to take things further, meaning you won’t pay anything if they’re unable to secure you a mortgage. Call now on 0808 189 2301 or make an enquiry and we’ll match you with your ideal guarantor mortgage advisor for a free, no-obligation chat today.
Possibly, it depends on the terms of the individual agreement. Some lenders expect the guarantor to remain in place throughout the entire mortgage term, especially where there is little evidence to suggest that the applicant’s income will increase in time.
On the other hand, some lenders will be happy to remove the guarantor once a certain percentage of the loan has been repaid. Again the minimum amount that needs to have been repaid before this is possible, will vary by lender.
It’s unlikely that you will be released from the mortgage under any other circumstances short of repaying the full debt, unless you are within the initial 14-day cooling-off period, at which point the arrangement can still be cancelled.
If a guarantor is unable, or unwilling to repay the loan after an applicant defaults on their mortgage, they will be breaking the terms of the agreement. This could potentially lead to both parties having their properties repossessed, although most lenders will be willing to look at other debt recovery options in the first instance.
Credit searches against guarantors will appear on their record, although are unlikely to affect your score directly unless the mortgage falls into arrears. If you then fail to cover the repayments on that account, both the applicant and the guarantor’s credit records will be negatively impacted.
When you apply for any form of borrowing, the lender will assess your total outgoings, including your financial responsibility as a guarantor. It could therefore affect your future ability to borrow money, and particularly to get a mortgage yourself, if your expendable income is unable to support more borrowing.
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