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Mortgage with a guarantor

Last updated on 14th September 2023 by Martin Alexander

A guarantor mortgage can be a great way of buying a property, especially if you can’t buy a property by yourself.

Lenders assess mortgages based on risk, but with a guarantor, the risk for lenders is greatly reduced. However, the risk is largely placed on your guarantor, as they guarantee the mortgage will be repaid.

If you’re unsure whether you’re eligible to apply, you can make an enquiry, and our experts will discuss your options.

What is a guarantor mortgage?

A guarantor mortgage is for applicants who don’t have enough income to qualify for a mortgage on their own. A guarantor, such as a parent or close family member, guarantees that they’ll repay the mortgage if the borrower can’t.

Guarantors offer security to a lender, such as savings or assets. If you miss any mortgage payments, your guarantor is legally obligated to repay your lender.

A guarantor can be liable for the entire value of the mortgage, but some products limit the liability.

How do guarantor mortgages work?

A mortgage with a guarantor works in the following way:

  • Your mortgage lender will place a charge on your guarantor’s assets or savings
  • The guarantor has a legal obligation to repay any mortgage arrears or risks losing their home
  • Guarantors don’t own any shares of the property being purchased

Lenders typically secure a legal charge on your guarantor’s home or savings. If the mortgage remains unpaid, your guarantor’s property or savings can be used as collateral.

This can be risky, as your guarantor could lose their home if you don’t repay your mortgage. For this reason, guarantors are only approved after taking legal advice.

Who can be a guarantor?

Most lenders will require your guarantor to be a family member. Some lenders require guarantors to be mortgage-free, whereas others will accept guarantors with enough equity. Guarantors no longer working due to retirement can still qualify but may have to show savings instead of an income.

To qualify, a guarantor will need to:

  • Be a homeowner
  • Own their property outright or have a high level of equity
  • Have a high enough income to repay the mortgage if you can’t
  • Legally understand their liability as guarantors
  • Have a good credit score
  • Be a family member in most cases

If your guarantor prefers to use their savings as security, you may benefit from a family mortgage. This is where savings are placed in an account and linked to your mortgage. Guarantors can then withdraw their funds once the initial mortgage term ends. This is usually after a maximum of five years.

Read more: How to get a family mortgage

Who can get a guarantor mortgage?

A guarantor mortgage can be suitable if:

  • You’re struggling to save for a mortgage deposit
  • You have bad credit or no credit history
  • Your income is too low for a mortgage

If you’ve struggled to get a mortgage but have an eligible guarantor, you may qualify. Furthermore, you can unlock some great deals as the risk for lending is reduced.

Learn more: Can I get a mortgage with a low deposit?

What are the risks of being a guarantor?

Although having a guarantor can allow you to get a mortgage, there are risks involved:

  • You could lose your home – Lenders may use your home as security for the mortgage. If the mortgage remains unpaid by both the borrower and guarantor, lenders could repossess and sell your property to recover the loan amount.
  • Damage to your credit score – If the borrower fails to repay the mortgage, the lender will expect you to pay any arrears. If the mortgage isn’t paid, you risk damaging your credit score.
  • Restricted access to savings – If the mortgage is secured against your savings, then you may have a restriction on how much you can spend. Access can sometimes be restricted until most of the mortgage is paid off.
  • Change in circumstance – Although you may be confident that you can be a guarantor, circumstances can change. If your financial situation changes, it could affect your ability to repay the mortgage. Lenders can then use the security you offered to repay the mortgage instead.
  • Damage to family relationships – As guarantors are helping borrowers to get on the property ladder, it can cause strain on a family if mortgage payments aren’t being met.

Will my guarantor own my property?

Your guarantor will not own a share of your property. Guarantors are also not registered on any title deeds with the land registry. The guarantor agreement is strictly between your mortgage lender and your guarantor.

Guarantors need to have complete faith in the person they’re providing a guarantee for. This is why lenders prefer mortgage guarantors to be family members, such as parents. This doesn’t mean that your guarantor will own your property. It simply means they’ll have a legal obligation to ensure the loan is repaid.

Can I get a 100% mortgage with a guarantor?

One of the main advantages of having a guarantor is that you will need little or no deposit. Some lenders offer 100% mortgages with a guarantor. This is ideal when you’re struggling to save a deposit, but the rates on offer won’t be the best.

Lenders typically offer the best rates to those with deposits of at least 20-25%. That said, as guarantors are there to minimise a lender’s risk, you may still be able to secure a great deal. This largely depends on your guarantor and the security provided, such as the value of their property or savings they can provide.

How much can I borrow?

Having a guarantor can be a huge advantage if your income is too low for a mortgage. A low income can result in lenders offering you a reduced loan amount. Even worse, they could decline your mortgage altogether. If you’ve set your heart on a property, a reduced mortgage amount won’t help.

If you have a guarantor, a lender may consider your guarantor’s income in addition to your income. This is great for maximising the amount you can borrow. For instance, a lender may offer you a mortgage of £100,000, but with a guarantor, they may agree to a mortgage of £140,000.

Can I stop being a mortgage guarantor?

A guarantor can be removed from a mortgage, but this is subject to your lender’s original terms. Furthermore, it’s impossible to remortgage without a guarantor until your existing lender consents.

The terms of your mortgage will dictate when your guarantor can be removed from a mortgage. This will be based on a set number of years or until a certain amount of the mortgage has been repaid. If payments are missed, your lender may extend the time until your guarantor can be removed.

It’s important to check the terms of your mortgage if you wish to remove your guarantor. This will give you a clear indication of how and when your guarantor can be removed.

Mortgage guarantor FAQs

Guarantors are typically only eligible for residential mortgages. Using a guarantor for a buy to let mortgage is extremely rare, but there are a handful of lenders that may consider it.

If you have bad credit, having a guarantor can help. Nonetheless, you may still qualify for a mortgage without a guarantor. If your guarantor has bad credit, then you may struggle to get a mortgage unless your guarantor has enough equity in their property.

Your mortgage will have its own unique set of terms and conditions. Your lender should inform you about this in greater detail. Some lenders will allow you to repay some of your mortgage with your guarantor’s estate. Other lenders will simply require a new guarantor.

Most lenders will typically assess your guarantor’s equity and savings rather than their income. As a result, retired guarantors for a mortgage shouldn’t be an issue, but this does depend on each individual lender.

Most high street lenders offer guarantor mortgages. If you want to find the most suitable lender, speak to a mortgage advisor who can compare each deal you qualify for.

Yes, being a guarantor can affect getting your own mortgage. This is because lenders will assess the legal charges on your home. If you’re a guarantor, it’s likely you’ll have two charges from two lenders on your property. This is why you should get legal advice if you’re thinking about becoming a guarantor.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.