There are so many mortgages open to borrowers, but how do you know which is the right one for you? When there are so many different options to choose from, it can be confusing to know what the right mortgage deal for you is. For some, passing a lender’s affordability checks seems impossible, but where there’s a will, there’s a way – Guarantor Mortgages.
Welcome back to Zing’s blog! This week, we’re going to walk you through guarantor loans in our brief guide. We’ll be outlining what Guarantor Mortgages are, how they work and everything you need to know about them! If you have been unable to secure a mortgage through lenders’ strict affordability checks then guarantor mortgages may be ideal for you! Keep reading to find out more info.
A guarantor mortgage is an ideal way to secure yourself a mortgage if you can say ‘Yep, that’s me’, to one or more of the following criteria:
Using a guarantor mortgage means that even if your credit isn’t great or you have a low deposit, you can still land yourself a mortgage. But, how? Well, by using a guarantor to support your application, it means you might be able to secure a mortgage even if you don’t meet the financial criteria of lenders. Your guarantor will be able to help you secure a mortgage using their ‘good reputation’, to support your application. So, how do guarantor mortgages work?
Taking out a Guarantor Mortgage means that you’ll need to find yourself a guarantor. Yes, you need to make sure that they’re happy to sign a legal document, outlining that they will cover any mortgage repayments you miss. This is so lenders don’t have to rely solely on your ability to repay your mortgage, and their ‘loan’ to you is secure (because the guarantor guarantees the repayments). Your guarantor may also have to set aside an amount of cash (which varies from lender to lender), which is paid to the lender and held until the borrower (you) has paid off a certain amount. Your guarantor will receive the cashback once this has been paid. However, the funds are inaccessible by the guarantor until the agreed amount is paid back.
As with any mortgage, if you (and your guarantor) fail to make repayments your home could be repossessed. However, there’s a risk that you guarantor’s home could be repossessed too. If lenders are unable to recover the full amount from the sale of your home, they can repossess your guarantor’s home to cover the remaining amount. So, if you take out a guarantor mortgage, it’s not just your home at risk, it’s your guarantor’s home too.
However, this is the worst case scenario (if you have failed to repay). Other things that will happen prior to this is that your lender can add extra charges on top of repayments (if paid late) and hold the guarantor’s money past the agreed period. This is why it’s crucial for you to keep up your mortgage repayments – for your own and your guarantor’s sake.
Deciding who you guarantor will come down to if they meet the set criteria of mortgage lenders. For a guarantor mortgage, you guarantor needs to have:
Your guarantor needs their own home and to have a good credit history. The high-income requirement is so that your guarantor can cover your mortgage repayments should you be unable to pay. Some lenders may only accept parents, grandparents or step-parents as guarantors – but this is dependent on the lender. If you think a guarantor mortgage may be right for you, then we know who you should speak to…
Yes, it’s us! At Zing, we have a team of dedicated advisors and brokers to help find the right mortgage deal for you. We can present to you all your mortgage options, hassle-free! Speak to the Zing team to find out if a guarantor mortgage is right for you.