![]() In the worst-case scenario, if the lender had to repossess and sell your property for less than the amount remaining on the mortgage, your family member could stand to lose their home. This means that to be eligible, the guarantor will usually need to own a high proportion of their property outright. ![]() These deals involve a charge being placed against the guarantor's property. If the lender had to repossess and sell your property, and received less than what you still owed on your mortgage, they could recoup the difference from your family member's savings. If you miss any mortgage repayments, the lender could hold on to your family member's savings for a longer period. Your family member can usually earn interest on the money linked to your mortgage, although the rate might be lower than they'd get with other savings accounts. The money is held as security for your mortgage for a set number of years, or until the amount you owe falls below a certain percentage (eg 80%) of the property's value. ![]() Some lenders offer mortgages where a family member deposits cash (typically 5%-20% of the property price) into a special savings account. Guarantor mortgages all come with slightly different names and eligibility criteria, but they generally fall in to one of these two categories: Savings as security If you need help managing your finances during the cost of living crisis, try our free My Money Health Check tool for tailored money-saving tips. What to do if you can't pay your mortgage.This will be possible as soon as you've built up enough equity in your property (by paying down your mortgage plus any growth in its value). The best way to minimise this risk is to remortgage as soon as you can to a deal which doesn't require a guarantor. However, if missed repayments mean that the lender has to repossess and sell your property, both you and your guarantor would usually be responsible for any shortfall if the property is sold for less than the amount still owed on the mortgage.įor example, if you owed the lender £150,000 but they were only able to recover £125,000 by repossessing and selling your property, the £25,000 difference could be taken from your guarantor's savings or property, depending on what they used to guarantee the mortgage. ![]() If you don't miss your repayments, your guarantor won't have to do anything. Guarantor liability if you can't pay your mortgage You can find out more about the risks and alternatives in our guide to how parents can help first-time buyers. Received legal advice: a requirement from some lenders in order to confirm guarantors are aware of the risks.A good credit history: so lenders can trust that they are financially reliable.Savings or property: your mortgage lender will either hold some of your guarantor's savings in a locked account, or will take legal charge over a portion of their property to secure the mortgage on your property.Many lenders will require the guarantor for your mortgage to be a close family member - usually a parent. Find out more: getting a mortgage with a bad credit score.Little or no credit history: for example, if you've never had a credit card - this means lenders won't have any evidence of how well you deal with debt, so having a guarantor could mean they're more inclined to give you a mortgage.Īn independent mortgage broker can give you more in-depth advice on whether a guarantor mortgage is suitable for you.A bad credit score: having a guarantor might make a lender more inclined to offer you a loan.A small/no deposit: you could potentially borrow up to 100% of a property's value with a guarantor mortgage.A low income: lenders will decide how much to lend you based on your income, so having a guarantor may enable you to get a bigger loan.Who are guarantor mortgages suitable for?Ī guarantor mortgage could be suitable if you're looking to buy a property with. We do not allow this relationship to affect our editorial independence. If you click on the link and complete a mortgage with L&C Mortgages, L&C is paid a commission by the lender and will share part of this fee with Which? Ltd helping fund our not-for-profit mission. Mortgage broking service provided by L&C Mortgages
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