This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.
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:
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 info@revolutionbrokers.co.uk.
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.
This product is a slightly different type of mortgage when two people borrow money, but only one person's name appears on the title.
If the buyer is a first-time purchaser, they will usually qualify for exemption from stamp duty depending on the property's value.
A guarantor can also support only part of the mortgage.
The borrower may not need a significant deposit if they guarantee the total mortgage - or a lender might accept them with a smaller than usual deposit.
The mortgage will function smoothly if all mortgage payments are completed on schedule, and the guarantor won't be expected to make any contributions.
However, it's vital to remember that if a borrower fails to make payments, the property or any other security the guarantor has put forward can be at risk.
To receive a guarantor mortgage, you'll need to do the following:
Guarantor mortgages are frequently available from a variety of lenders.
They each have their own set of restrictions, so it's wise to consult an independent mortgage broker or financial consultant to get the best guarantor mortgage for you.
Lenders always have policies and criteria, so your acceptance and offered rates will depend on several factors:
It would be best to determine whether you have a relative who can act as a mortgage guarantor.
The lender will want to know if they can pay off their current bills while paying the new mortgage.
Even with a guarantor, you'll need to pass a basic credit check as a potential borrower. The guarantor must also have a strong credit score, be at least 21 years old, and be a current homeowner.
Someone who has a direct financial relationship with you, such as your spouse, may be ineligible.
Because first-time buyers experience difficulty climbing on the property ladder, more lenders are offering guarantor mortgages.
The following lenders often offer guarantor mortgages:
Parent-guaranteed mortgages can assist children in purchasing their first property.
A guarantor mortgage can also assist borrowers with:
A guarantor mortgage is paid over the same time as a traditional mortgage, typically 25 years.
When a guarantor signs the agreement, they commit to settling the mortgage if the borrower cannot make the mortgage repayments.
Direct debits are moved to the guarantor if this happens. This change makes the guarantor accountable for additional loan fees if payments are missing.
The guarantor has no ownership interest in the property. They sign a legal contract promising to repay the loan if the borrower is unable to do so.
As a kind of security, they rely on personal property or funds.
The lender holds a charge on the property and can repossess it if repayments are not met.
Savings are kept in an account held by the lender for an agreed period. The guarantor cannot make withdrawals during this time.
The money saved could be used to make up for any missing mortgage payments.
A guarantor must:
A guarantor mortgage benefits consumers in two ways:
The borrower may borrow the entire amount if the guarantor guarantees the whole loan or a specific part.
If savings are used as security for a guarantor mortgage, they are placed in a lender-approved savings account.
They stay for a set period or until the borrower's mortgage is paid off. Interest is sometimes paid.
Other times, interest is utilised to pay down the borrower's mortgage interest. If the house is repossessed, the gap between the sale price and the amount owing by the borrower can be covered using savings.
If you have negative equity, for example, this could be the situation.
When the value of your property is less than the amount owed on your mortgage, you have negative equity. Some lenders allow guarantors to contribute their funds to the loan as a deposit.
This option may allow the borrower to borrow more money with a lower loan-to-value (LTV) ratio, giving them additional options.
The guarantor will not be barred from taking out other loans or mortgages in the future if the terms and conditions of the guarantor mortgage are followed.
It may limit their capacity to borrow additional money during the guarantor mortgage's term.
Therefore, it's essential to seek advice before applying for a guarantor mortgage, so both the first-time buyer and their guarantor are comfortable that it's the best solution.
To discuss guarantor mortgage rates, or have a chat about whether this type of mortgage is the best option in your circumstances, give Revolution Brokers a call on 0330 304 3040.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.
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