First Time Buyer Guarantor Mortgages
A mortgage product with a guarantor is where a third party, often a parent, guarantees the loan.
They take responsibility for the mortgage repayments in addition to the principal applicant, generally their child.
If the borrower fails to make mortgage payments, the guarantor is responsible. They put their house or other valuables up as collateral for the loan.
Guarantor mortgages are an excellent option for first-time purchasers who cannot obtain a mortgage without financial support. This situation frequently happens because they have:
- Insufficient earnings to meet affordability requirements
- A small deposit
- Problems with their credit history
Borrowers who have a guarantor have a broader selection of mortgage products and lenders to choose from.
This scenario could mean taking out a larger loan from a mortgage provider that offers guarantor mortgages or first-time buyer home loans at a lower interest rate.
We'll go through how first-time buyer guarantor mortgages work and why they're typically the best option to enter the housing market if you don't have a sizable down payment.
For more information about guarantor mortgages, or to compare the rates currently available on the market, give mortgage Brokers a call on 0330 304 3040, or email the team at [email protected].
What Are Guarantor Mortgages for First-Time Buyers?
Many lenders require the guarantor to be listed as a joint applicant for the mortgage paperwork.
This lending product is a mortgage in which the guarantor verifies that they will pay the loan back if the primary borrower cannot do so.
As a result, you'll find guarantor mortgages marketed under several product names, such as:
The responsibility for mortgage repayments is shared between the borrower and the guarantor.
The guarantor assumes the risk because their home or money are utilised as collateral. If the borrower does not make payments, their home may be repossessed.
Lenders will look at the applicant's credit record and affordability when evaluating how much to lend.
There can be additional fees with a guarantor mortgage due to the extra admin work required.
If the guarantor is already a homeowner, and they are required to put their name on the deeds, there may be a knock-on impact to things like an obligation to pay stamp duty.
If you're considering this form of loan, it's crucial to seek independent advice from an experienced mortgage broker, so you're aware of all the pros and cons.
2023-05-09 
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