If you want to get on the property ladder, but have a poor credit history, or not enough deposit, then it’s worth exploring guarantor mortgages. This is when a third party, such as a parent or close friend, agrees to pay the mortgage if you can’t.
The guarantor will usually secure their own property against the mortgage, but it is possible to use a dedicated savings account as well. If the mortgage holder goes into arrears, the repayments will be taken from the savings account. The guarantor can access the savings for other purposes if it is not needed for mortgage repayments.
The person acting as the guarantor must sign legally binding documents to hold them to the agreement, and their own property could be repossessed if they fail to keep to the agreement. From a lender’s point of view, this minimises the risk of accepting an applicant with no deposit or a poor credit history.
It’s most common for younger people to ask their parents or an older relative to act as a guarantor, and some lenders specify that the guarantor is a relative. In some cases, a close friend may be willing to step in, if the lender is agreeable to the arrangement. In all cases, there needs to be an established and trusting relationship between both parties.
In almost all cases, the guarantor needs to be at least 21 years of age, and a homeowner with a good credit history. Some lenders may insist that the guarantor has paid off their own mortgage, while some will want to see that they have paid off at least 50%. They are basically looking for a situation which represents the least risk to them.
Lenders may also take into account the guarantor’s income and outgoings to check that they can afford to meet the repayments, if they still have a current mortgage of their own. In some cases, the guarantor’s savings may be taken into account if they do not own property, but these will need to be substantial.
The guarantor will have no legal share in the property, even if they do have to use their own funds to meet the mortgage repayments. It is important for them to find out as much as they can about the arrangement, and seek professional legal advice, before they enter into any agreement.
It’s a big commitment, as the guarantor is potentially putting their own home or savings at risk if the repayments are not met by the mortgage holder.
Anyone who has someone willing to act as a guarantor may apply for a guarantor mortgage. It’s usually an option for younger people who have little or no savings for a deposit, or people with a bad credit history, who may find it harder to get a mortgage deal.
If you would like to talk to a poor credit mortgage broker in the UK, please get in touch today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
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