At present, Guarantor mortgages are widely available and frequently sought after, with many of the lenders offering them to customers. When the first time buyer’s income is slightly less than what is needed for their preferred mortgage, a guarantor may step in to provide financial aid.
If guarantor assistance is required, various factors must be taken into account. The specific details will change depending on the lender, however the following may be used as a guideline of examples:
- The guarantor must accept either full or limited liability for the mortgage loan. If the applicants fail in making a payment, the guarantor will be responsible for the mortgage loan in consequence of their full liability. An instance where limited liability will become relevant is when the guarantor will pay the remainder of whatever the applicants cannot afford. So, for example, if the applicant pays 75% the guarantor must then pay the remaining 25%. This will mean that the guarantor will only be liable for 25% of the entire mortgage.
- The guarantors must prove that they can afford this additional mortgage alongside their own. (All lenders)
Family Guarantee Mortgage
This mortgage option is perfect for first time buyers who are in need of some financial aid that is not a gifted deposit. In this case, the money is given directly to the lender in the form of security for the deposit. This mortgage deal may not be available from all lenders, however some of the benefits include:
- The largest possible guarantee period of 10 years, so that charge against property is relinquished at the end of the specified time
- The guarantee that is provided by the guarantor will be held against their own property so that a cash deposit is needless
- Available for any amount of the price for purchase
- Ideal for applicants who do not have an adequate deposit but who do have willing parents or grandparents to hand