Guarantor Mortgages!

Written by Damon Pike – Principle Mortgage and Protection Advisor

Last updated: 25th January 2023

Sometimes, you may find that your circumstances are considered too risky for a lender to offer you a standard mortgage. A Guarantor Mortgage, i.e. having somebody to guarantee your mortgage, may help to reduce that risk and make a mortgage more attainable.

 

What is a guarantor mortgage?

 

Sometimes referred to as a family mortgage or springboard mortgage, this is where someone else will agree to make your mortgage payments on your behalf if you fail to do so. This would normally require some sort of asset for guarantee. Normally in the form of their property or a sum of savings, so that if you miss too many payments the bank or building society has security to retrieve the funds. (E.g., if they were to repossess the property but you are in negative equity, they will want to know there is somewhere else to retrieve the shortfall.)

Another option is what is called a joint borrower sole proprietor mortgage (JBSP), this is where the other person is listed as an applicant on the mortgage. However, they will not need to make a guarantee as they are equally responsible for the mortgage payments. (This differs from a joint mortgage as the other person is not listed as an owner on the title deeds and so will not incur a 3% stamp duty surcharge for owning a second property)

Who can get a guarantor mortgage?

 

Guarantor mortgages may be suitable for a variety of circumstances, but typically would be used for:

  • Low deposit (e.g., a first time buyer)
  • Low affordability (e.g., a single applicant)
  • Less than perfect credit
  • New job/ recent change of career.

It is recommended that you speak to a mortgage advisor to make sure this is right for you.

Who can be the guarantor?

 

Most lenders that offer guarantor mortgages will want this to be a close family member, that said, some may accept another relative or close friend depending on the circumstances. They will need to prove they can afford to cover any missed payments. In addition to this, some lenders will require a lump sum locked into an associated savings account, whilst others will require the guarantor to use their own property as security and they will need to meet the minimum equity threshold (for example, 50%). There are a few lenders who will accept a combination of the two.

For JBSP mortgages, they will need to run a full affordability assessment to look at income and expenditure. The guarantor will almost always need to have a good credit score.

How long will I need a guarantor?

 

Lenders requirements vary, some will need you to be below a certain LTV or capital remaining, whilst others will need a certain period of time to pass before re-assessing your affordability. If you get to the end of your initial rate period speak to your mortgage advisor to see what other options or lenders have now become available.

What will I need to do to secure a Guarantor or Joint borrower sole Proprietor Mortgage?

 

Firstly, speak to a whole of market mortgage advisor to make sure it is right for you, and to accurately compare the deals available. If appropriate, speak to your potential guarantor and make sure they understand their responsibilities and are happy to proceed. Guaranteeing your mortgage may affect your guarantors’ affordability when renewing their own mortgage.

It is strongly encouraged, in fact most lenders will insist, that you and the guarantor take independent legal advice, finances can be an emotive issue so make sure you have both considered this carefully.

And finally

 

If you need any more information, or you want to discuss your situation, contact us using the form below and we will get straight back to you.

 

Damon Pike

Principle Mortgage and Protection Advisor

 

Damon Pike

Principle Mortgage and Protection Advisor

 

Damon Pike

Principle Mortgage and Protection Advisor

Call Damon on 07503 942280

or send us a message using this form:

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Lupo Mortgage Services is based in Wolverhampton, but we operate throughout the whole of England and Wales.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please note that some mortgages such as commercial BTLs are not regulated by the FCA.

Lupo Mortgage Services is an appointed representative of Julian Harris Mortgages Ltd which is authorised and regulated by the Financial Conduct Authority, No. 304155. The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk