A guarantor mortgage enables parents to offer assurance that should things go wrong they will help which is great for first time buyer. With this type of mortgage the parents' names do not appear on the mortgage or deeds to the property, but instead they offer to act as a guarantor, pledging that should the mortgage payment not be able to be met, they will step in. It provides a solution for parents who do not want to become joint borrowers, but would like to provide a back-up and help their child become first-time buyers.
How do guarantor mortgages works, if you earn £25,000 a year and want to buy a property worth £100,000, but your lender will only give you a mortgage of £75,000, which leaves you with a shortfall of £25,000. So long as the guarantor's income allows them to afford the monthly repayments for a £100,000mortgage and not just the shortfall - then they will usually be eligible to guarantee your mortgage. Once you are comfortable with the idea of meeting the repayments yourself, without a safety net, the guarantor can be released from the agreement.
While having a guarantor allows you to get on the property ladder when you otherwise wouldn't have been able to, having a family member enter into a legally binding agreement with you, should be treated with caution. If you are considering the guarantor option, you should seek legal advice beforehand and bear in mind that there is a lot more at stake than just your finances.
Don’t forget government assisted house buying schemes, you might be able to get a 20 per cent equity loan through the Help to Buy scheme.
If you need to talk to someone simply request a call back. Remember this is just a guide and it’s always best to talk this through with one of our qualified Mortgage advisors.
Use a mortgage broker with experience can be invaluable in helping you to navigate through the nuances of different lenders conditions. Broker can have access to mortgages you wouldn't be able to get and the argument for using a mortgage broker becomes even more compelling. This may all seem very complex but a good mortgage advisor knows all the processes involved and can help you through each step.
For more specific help and to talk through you options, call our team of expert advisers today
Whether Selling, buying take a look our compete guide to buying your home, There are so many things to think about but we will try to make the buying and selling process will be a far less stressful experience.