Buying a home can feel out of reach when your income or deposit limits your mortgage options. A mortgage with a guarantor may offer another route onto the property ladder.
A parent or close relative will often act as a guarantor. Depending on the deal, they may cover missed payments or offer savings or property as security.
However, the role carries financial risk. Both people should understand the lender’s rules and the guarantor’s legal duties before applying.
What to agree before applying
Agree how support will work
Confirm whether the guarantor will cover missed payments or offer savings or property as security.
Check what the borrower can afford
The borrower must still pass the lender’s income and credit checks.
Understand what is at risk
The guarantor could lose savings or put their home at risk.
Compare lenders and get advice
Check each lender’s rules and arrange separate legal advice for the guarantor.
Check your position before viewing
Get an Agreement in Principle to understand how much you may be able to borrow.
What is a guarantor mortgage?
With a guarantor mortgage, another person supports your application. They may need to cover the payments if you cannot.
You own the home and make the monthly repayments, while the guarantor does not own a share.
Some deals use the guarantor’s savings as security. Others use equity in the guarantor’s property.
A guarantor mortgage is one type of family-assisted mortgage. Other family-backed mortgages may work differently.
How does a guarantor mortgage work?
The borrower shares their income, spending and credit history with the lender. The guarantor must also provide details about their finances.
If the borrower pays on time, the guarantor does not need to pay. However, missed payments may leave the guarantor responsible for the amount owed.
Family support may help if you have a small deposit or lower income. Even so, the lender will still check that you can afford the mortgage.
Check your borrowing power
See what you could borrow without a guarantor using our calculator.
How can the guarantor provide security?
Savings as security
The guarantor puts money into a savings account linked to the mortgage. The lender holds the guarantor’s savings for a set time.
If the borrower misses payments, the lender may use the money. The guarantor cannot access the savings until the lender releases them.
The deal will state how long the lender holds the money. Check whether the savings earn interest during that time.
Property as security
Some lenders use equity in the guarantor’s home as security. They place a legal charge on the property but do not take ownership.
If the borrower cannot repay the mortgage, the guarantor’s home may be at risk.
Who can be a guarantor for a mortgage?
A parent will often act as a guarantor. Some lenders may also accept grandparents, siblings, other relatives or close friends.
Lenders usually expect the guarantor to have a good credit history. They may also check their income, savings and home equity. Rules on age, residency and their relationship to the borrower can vary.
Retired parents may still qualify. The lender will check their finances and the planned mortgage term.
Before applying, make sure the guarantor understands the risks and can afford to cover any missed payments.
Who might a guarantor mortgage suit?
Guarantor mortgages for first-time buyers may help when a small deposit or lower income limits their options. Some home movers may also qualify, but lender rules vary.
Getting a guarantor mortgage with bad credit may be possible. However, the lender will look at what happened and how recent it was. A guarantor does not remove poor credit from your application.
You must also show that you can afford the mortgage payments. Even with a guarantor, the lender may still decline your application.
Which banks offer guarantor mortgages?
When looking for a guarantor mortgage, UK borrowers may find fewer options than with a standard mortgage. Banks, building societies and specialist guarantor mortgage lenders may offer these deals. However, the choice can change over time.
Some lenders use a standard guarantee. Others ask for savings or property as security. Deposit and loan-to-value rules vary between deals.
Guarantor mortgage rates also vary. Compare the interest rate, fees, security terms and rules for releasing the guarantor.
A mortgage broker can check current deals and find lenders that suit both the borrower and guarantor.
What risks does the guarantor face?
The guarantor takes on legal responsibility under the agreement. Missed payments could harm their credit history. The lender may also ask them to cover the amount owed.
If savings support the deal, the guarantor may lose access to them for several years. A property-backed deal could place their home at risk if the borrower cannot pay.
The guarantee may also reduce how much they can borrow. A change in income, health or their relationship with the borrower could create problems.
Before signing, the guarantor should get independent legal advice.
How to get a guarantor mortgage?
Start by checking your budget and discussing how the guarantor can help. A mortgage broker can then compare deals based on your income and deposit.
Both people must share details of their income, spending and debts. You should also check your credit report before applying. The lender will review any savings or property offered as security.
Once you find a home, your broker can submit the full mortgage application. The lender will value the property and run its final checks.
How do you release the guarantor?
The lender must agree to release the guarantor. You may need to show that you can afford the mortgage alone or have reduced the balance enough. In some cases, you may need to remortgage.
What other family-assisted options exist?
A family-assisted mortgage can use a gifted deposit, linked savings, home equity or another person’s income. Each option brings different costs and risks.
Some lenders call a joint borrower sole proprietor mortgage a family-backed mortgage. The supporting borrower agrees to repay the loan from the start but does not own the home.
By contrast, a traditional guarantor usually pays only if the main borrower cannot. Product names vary, so always check the legal terms.
Saving a larger deposit is another option. It could lower your loan-to-value and give you access to more deals.
How Muttuo Mortgages can help
Guarantor mortgage rules vary between lenders. Many providers do not offer them.
As a whole-of-market mortgage broker, Muttuo has access to over 100 lenders. We can compare guarantor mortgages and other family-assisted options. We will then explain which may suit your needs.
Muttuo Mortgages can help you:
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compare mortgage rates, fees and lender criteria
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review savings-backed and property-backed options
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check the position of the borrower and guarantor
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prepare and manage your mortgage application
Ready to explore your options?
Speak to Muttuo for help comparing guarantor and family-assisted mortgages.
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Your lender may repossess your home if you do not keep up with your mortgage repayments.
