What is a guarantor mortgage?
A guarantor mortgage is a home loan designed for borrowers who might not earn enough to get a mortgage on their own. The guarantor agrees to guarantee they will repay the mortgage if the borrower does not meet their agreed payments.
Who might need a guarantor mortgage?
A guarantor mortgage may be suitable for borrowers who:
Are struggling to find a loan big enough enough for a home
Don’t have any credit history - a younger borrower who may have a reasonable income but no history of credit
Someone with a poor credit history
How do guarantor mortgages work?
The person who guarantees the mortgage has to offer up their own home, or savings as security to the mortgage lender.
The person who acts as a guarantor will need to get legal advice as they will be putting their name on legal documents
With some types of guarantor mortgages, such as a parent guarantor mortgage, the guarantor agrees to set aside money in a savings account. The savings still earn interest but are there to be used as security in case the borrower misses a repayment.
There are other forms of guarantor mortgage where the money is held in an account but doesn’t earn interest.
Does the Government offer a guarantor scheme?
In April 2021 the UK Government introduced a mortgage guarantee scheme. The scheme is open to new 95% mortgages until 31 December 2022, with participating lenders offering 95% mortgages under the government guarantee from 19 April 2021. Find out about the Government scheme.
Does a guarantor own a share in the property?
The guarantor is only named on the mortgage documents, so they won’t be named on the title deeds of the property and have no entitlement to, or share of, the property.
Who can be a guarantor?
Parents or close relatives can be guarantors, especially if they have good credit and a larger income. Some lenders insist a guarantor is a member of the borrower’s family and have paid off their own mortgage. Guarantors can be retired so long as they can prove they have the savings or assets in place to step in and cover repayments if needed.
Can I get a guarantor mortgage if I have bad credit?
It is possible to get a guarantor mortgage if you have a bad credit score as some of the risk of paying back the mortgage is shared with the person guaranteeing the mortgage.
Who can guarantee my mortgage?
Depending on the lender you choose, your guarantor could be a relative or close friend. Unlike a joint mortgage with your parents, you could both lose your homes if you stop repaying your guarantor mortgage. However, if you pay your guarantor mortgage each month, there is no financial risk to you or your guarantor.
More information on guarantor mortgages
Can anyone get a mortgage with a guarantor?
Some lenders only accept parents or grandparents as a guarantor, but others are more flexible. Whoever you use, they usually need to:
Use this comparison page to find the lowest interest rate for the term you want. Check the lender can accept your guarantor before you apply.
What are guarantor mortgages used for?
Although guarantor mortgages may seem more suited to first time buyers they can be used by other borrowers.
Someone taking out a mortgage to move home.
For remortgages, provided past payment history shows a perfect payment record.
If you are changing the borrower; for example if you are buying a former spouse out of a joint mortgage
Can you get a guarantor mortgage without a deposit?
You do not need a guarantor mortgage deposit in all cases, but if you have one it could help you get a better deal. For example, a 100% loan to value (LTV) mortgage requires no deposit but is likely to charge you a higher interest rate than a 95% LTV mortgage deal with a 5% deposit.
You still need to have enough money to pay for any legal fees or stamp duty for buying your home. Depending on the price of your property, this could cost you thousands.
Find out how much you can borrow before applying for a mortgage
