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Guarantor Mortgage Guide

Guarantor mortgages are a great option for some, but how much do you know about them? Find out all you need to, here.

One of the hardest things about getting a mortgage is wondering if you’ll have the amount you want approved by lenders. Through strict affordability checks and assessments, lenders work out how much cash they’re willing to part with, based on your deposit, income and the price of your property too. Finding a mortgage that works for you and one that you actually qualify for isn’t easy. And, if you’re ready to purchase, but don’t meet the lenders’ affordability criteria, then you’ll be unlikely to get the deal you want.

However, for those that can’t pass those checks so easily, there’s a way to secure yourself a mortgage. Guarantor mortgages are becoming an increasingly popular and viable option for first-time buyers and others who may not meet lenders’ criteria.

We’ve spoken to Zing Mortgages, an Essex mortgage adviser and broker, and asked them all about guarantor mortgages. With the info they’ve provided, we’ve created this post to tell you everything you need to know about guarantor mortgages! What they are, how they work and who they’re suited for. Find out everything you need to know, right here.

What is a guarantor mortgage?

Guarantor mortgages are a different way of securing a mortgage if you have found that you may not have the funds or the means to secure yourself a ‘traditional’ mortgage. Usually guarantor mortgages are great for those that may not have the full deposit required, or no deposit at all. Also, like we’ve said, they’re a great option for first-time buyers as well as those who may be on a low income. If you don’t have a good credit score or history, guarantor mortgages are also suited to you. Finally, for those that want to buy a home, more expensive than the mortgage they can borrow, guarantor mortgages are a handy alternative. For your mortgage, you’ll need to use a guarantor to support your application (the clue is in the name). But how do guarantor mortgages work?

How do Guarantor Mortgages work?

Like we’ve said, you’ll need to find yourself a guarantor in order to get a guarantor mortgage. This needs to be someone that is happy to sign a legally binding document stating that should you, the borrower, be unable to make any repayments on your mortgage, they, the guarantor, will cover them for you. This means that lenders are assured their investment is returned, and it doesn’t matter if you have a low income or deposit, because their investment is secured by you having a guarantor. They guarantee that the lender’s repayments are covered and returned.

Your guarantor must have a sum of money (the amount is agreed by the lender), to pay into an account. This acts sort of like a deposit, however your guarantor will have this returned to them. The funds are held until the borrower, you, has paid off an agreed amount. What can happen if you frequently miss repayments is charges can be added or the period which your guarantor’s money is held for can be extended. In the worst-case scenario, your home can be repossessed, and if the repossession and sale doesn’t cover the amount you owe, your guarantor’s home is at risk. So, make sure you keep up with repayments!

Who can be my guarantor?

Whilst all lenders are different, the rule of thumb is that your guarantor has to meet certain criteria. It’s essential that they be a homeowner as well as having a good credit history too. Sometimes, it can fall onto them to repay, so lenders want to see their credit history, establishing their reliability to pay back on time. Your guarantor will also need to have a high enough income, to not only manage their own outgoings, but to cover any monthly repayments you may miss on your mortgage. It’s so lenders know that they’ll be getting their monthly repayments from someone if you’re unable to repay. All lenders, and we mean all, will ask that your guarantor has received legal advice, regarding becoming a guarantor for a guarantor mortgage. This is because they will be signing a legal document, tying them into meeting any repayments you miss. As most mortgages last around 25 years or so, ensuring that they understand the responsibilities and the risks is essential. Some lenders will only allow your guarantor to be a parent, step-parent or grandparent.

Guarantor mortgages can be an ideal option, for first-time buyers especially. Remember, if you have a low income, a poor credit history or a deposit that isn’t enough to secure a mortgage from traditional lenders, guarantor mortgages may be ideal for you. You’ll need a guarantor, that understands the risks and responsibilities, but also qualifies to be your guarantor. This is subject to the lender, and their criteria.