What is a guarantor mortgage?
Guarantor mortgages are primarily to assist first time buyers get on the property ladder and it will enhance the borrowing power of the applicant.
The guarantor will give a fall back to a lender in case the applicant defaults on their repayments. Basically, they sign up to be liable if the applicant stops paying back what they owed, therefore, the lender has the right to pursue the guarantor for any missed payments. Their guarantee basically means that you are less of a risk because they have a way of getting their money back if you don't stick to your agreement with them.
Not all lenders offer guarantor mortgages and those that do tend to enforce a more restrictive lending policy than would normally apply to non-guarantor loans. Students are a common type of applicant along with first time buyers and young professionals that are currently on a low income.
The lenders that do market this type of product will adopt the following criteria:
- The guarantor must be a blood relation eg., parents, brother or sister
- The affordability is predominantly assessed on the Guarantor's income
- Any other mortgages or loans that the guarantor has will be taken into account under the affordability assessment.
In summary, this can be a complex area and you should seek independent mortgage advice. If you require advice in this area or for all your mortgage and financial needs, please come and talk to me as I would be more than happy to assist you.
As Independent Mortgages Advisers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Pop in for a no obligation chat with myself or another member of the team at our Edinburgh Information Centre or give us a call on 0131 253 2920.
The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain.
The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£250 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.