Many people come to us looking for a guarantor mortgages for their first property for one of two reasons:
They either can’t afford the mortgage they want on their current income, or they don’t have the deposit readily available and are looking for a way to buy a property without one
What is a guarantor?
A guarantor is a person who is willing to provide a guarantee to the lender that, if the borrower doesn’t pay, the guarantor will be legally responsible for the repayments.
How do guarantor mortgages work?
When lenders are looking at a guarantor mortgage, they take the earnings of the applicants, as well as the deposit they have available, as a base and then take into account the guarantor’s income, too.
For example, if a young couple were looking at purchasing a property worth £200,000, the lender would look at their joint income (for example, £30k) and the 10% deposit they have available (£20k). Considering the maximum amount that they would be able to borrow (usually 5x income amount = £150k) plus the deposit, they would still be £30k short.
The guarantor’s income is then looked at, and if the guarantor’s maximum borrowing amount was greater than the difference, the mortgage would usually be accepted.
Certain lenders will place limits on the amount the guarantor can be responsible for, and sometimes, the guarantor’s property is used as collateral against the new property, should the applicant default on payments.
For advice on how you can use a guarantor mortgage to purchase your property, speak to one of our expert advisers who will be able to help you with the next steps.