Guarantor mortgages

Embarking on the journey towards home ownership can be challenging, particularly when it involves financial terms such as “Mortgage with a guarantor” and “Guarantor mortgages”. These financial products are often a beneficial solution for first-time buyers or those with a limited credit history seeking to secure a property. With a guarantor mortgage, you have the opportunity to borrow a higher amount, backed by a guarantor – often a parent or a close family member – who is willing to cover your mortgage repayments if you default.

Although this arrangement might seem simple, it’s crucial to fully comprehend the responsibilities and potential implications for both the borrower and the guarantor. In this guide, we will comprehensively explore guarantor mortgages, discussing their advantages, potential drawbacks, and how they compare with other types of mortgages.

What exactly is a guarantor mortgage?

A guarantor mortgage is a type of mortgage where a third party (the guarantor) agrees to pay the mortgage repayments if the borrower is unable to do so. The guarantor is typically a close family member, such as a parent or close relative, who has their own property and a stable income source.

This type of mortgage is often used when the borrower has insufficient income to secure a mortgage on their own, has a low credit score, or is a first-time home buyer without a substantial deposit. It provides lenders with an additional layer of security, as they have another party to rely on for repayment if the borrower defaults.

How does a guarantor mortgage work?

A guarantor mortgage works by providing a safety net for a mortgage lender in case the primary borrower fails to make their mortgage repayments.

Here’s a step-by-step explanation of how it works:

Application: The borrower applies for a mortgage in the usual way. The lender assesses the borrower’s income, outgoings, credit history, and deposit. If the lender decides that the borrower is a high-risk applicant (perhaps due to a low deposit, low income, or poor credit history), they might suggest the use of a guarantor.

Choosing a Guarantor: The borrower must then find a suitable guarantor. This is usually a close family member who has a steady income and a good credit score. In many cases, the guarantor must also be a homeowner.

Guarantor’s Role: The guarantor agrees to cover the mortgage repayments if the borrower defaults. They don’t have ownership rights over the property but are linked to the mortgage.

Assessment: The lender will assess the guarantor’s financial situation to make sure they could afford the repayments if they had to. This includes income, outgoings, and credit history.

Agreement: If the lender is satisfied with the guarantor’s finances and all other aspects of the mortgage application meet their criteria, the mortgage is approved. Both the borrower and the guarantor sign the mortgage agreement, making a legal commitment.

Repayments: The borrower makes the mortgage repayments as per the agreement. If the borrower is unable to make these repayments, the guarantor must step in and pay instead.

Release of Guarantor: Depending on the agreement, the guarantor may be released from their obligations after a certain period of time or when the borrower has repaid a certain amount of the mortgage. This must be discussed with the lender and usually needs to meet certain conditions.

How much can I borrow for a mortgage with a guarantor?

The amount you can borrow with a guarantor mortgage can vary significantly based on a variety of factors. Typically, lenders will assess the following:

Income: Both the borrower’s and guarantor’s income will be assessed to determine the mortgage amount. Lenders typically offer between 4-5 times your annual income, but this can vary.

Outgoings: Your existing outgoings or expenses (such as loans, credit card payments, childcare costs, etc.) will be considered to determine how much you can afford to repay monthly.

Credit History: Both the borrower’s and guarantor’s credit histories will be checked. If either party has poor credit, this could reduce the amount you’re allowed to borrow.

The Guarantor’s Financial Situation: The guarantor must demonstrate that they can afford to cover the mortgage repayments if the borrower defaults. This will include an assessment of their income, other financial commitments, and potentially their equity if they own property.

Deposit: While guarantor mortgages can sometimes require smaller deposits, a larger deposit can increase the amount you’re allowed to borrow by reducing the lender’s risk.

Property Value: The value of the property you’re planning to purchase can also affect how much you can borrow.

Mortgage Term: The length of the mortgage term can influence the size of the loan you’re allowed to borrow.

What documents will my guarantor need to provide to the lender?

When acting as a guarantor for a mortgage, the guarantor will need to provide a number of documents to the lender. The exact documentation required may vary between lenders but generally includes:

Proof of Identity: This typically includes a passport or driving licence.

Proof of Address: A utility bill, council tax bill, or bank statement can often serve as proof of address.

Proof of Income: The guarantor will need to prove they can afford the mortgage repayments if the borrower defaults. This often means providing payslips, bank statements, or tax returns.

Proof of Existing Financial Commitments: The lender will want to understand the guarantor’s existing financial commitments. This could involve providing details of current debts, loans, credit card statements or other mortgages.

Credit Report: The lender will typically perform a credit check on the guarantor to assess their creditworthiness. While the guarantor won’t need to provide this, they will need to give consent.

Proof of Homeownership (if applicable): If the guarantor owns their home, they may need to provide proof of this.

What are the advantages of getting a guarantor mortgage?

A guarantor mortgage can have several advantages, particularly for borrowers who might struggle to secure a mortgage by themselves. Here are some of the main benefits:

Higher Loan Amounts: With a guarantor, lenders may be willing to offer larger mortgages than they would to a borrower alone, as the guarantor provides additional security.

Improved Mortgage Approval Chances: Having a guarantor could make the difference between a mortgage application being approved or rejected, especially for borrowers with lower incomes or poor credit histories.

Lower Deposit Requirements: Guarantor mortgages can sometimes be obtained with a smaller deposit than other types of mortgages, which can be beneficial for first-time buyers or those who are struggling to save a large deposit.

Access to Better Interest Rates: With the additional security provided by a guarantor, some lenders may offer more competitive interest rates.

Helps First-time Buyers: A guarantor mortgage can be a useful way for first-time buyers to get on the property ladder if they don’t have a high income or large deposit.

Assistance for Self-employed or Freelancers: Those with non-traditional income streams may find it easier to secure a mortgage with a guarantor, as they can provide the additional security that lenders require.

Potential for the Guarantor to be Released: Depending on the specific agreement, it may be possible for the guarantor to be released from the mortgage after a certain period of time or once the borrower has paid off a certain percentage of the loan.

What are the disadvantages of getting a guarantor mortgage?

While there are advantages to guarantor mortgages, they also come with potential drawbacks. Here are some of the main disadvantages:

Risk to Guarantor: The most significant disadvantage of a guarantor mortgage is the risk it presents to the guarantor. If the borrower cannot make their repayments, the guarantor is legally obligated to do so. This could potentially place a significant financial burden on the guarantor.

Potential Impact on Credit Ratings: If the borrower defaults and the guarantor cannot make the payments, it could negatively impact both the borrower’s and guarantor’s credit ratings.

Risk to Guarantor’s Property: In some cases, the guarantor may have to secure the mortgage against their own property. This means if the borrower defaults on their payments, the guarantor’s home could potentially be at risk.

Potential Strain on Personal Relationships: Mixing financial obligations and personal relationships can potentially lead to issues. If the borrower struggles to meet their repayments, it could put a strain on their relationship with the guarantor.

Limits on Guarantor’s Borrowing: Being a guarantor can limit the guarantor’s ability to borrow. Lenders may take into account the guarantor’s obligation when calculating their own borrowing capacity.

May Not Aid Credit History: While this can vary, in some cases, a guarantor mortgage may not help the borrower build a credit history as effectively as a traditional mortgage would.

Limited Choice of Lenders: Not all lenders offer guarantor mortgages, which could limit your choice of providers and products.

Who are guarantor mortgages suitable for?

Guarantor mortgages are typically suitable for individuals who may have difficulty getting approved for a mortgage on their own due to a variety of factors. This can include:

First-time Home Buyers: First-time buyers often need more credit history or a sufficient deposit to get a mortgage. A guarantor can provide the additional security a lender requires.

Low Income Earners: If your income is relatively low and doesn’t meet the lending criteria of mortgage providers, a guarantor can help you secure a mortgage.

Individuals with Poor Credit History: If you’ve had financial problems in the past, and it’s affected your credit rating, a guarantor can reassure the lender that the mortgage repayments will be covered.

Self-Employed or Irregular Income: For those who are self-employed or have an irregular income, it can be difficult to meet the strict income requirements of some lenders. A guarantor can help mitigate these concerns.

Young Borrowers: Younger individuals who are starting their careers might not have a high enough income or a long enough employment history to qualify for a mortgage on their own.

Borrowers with Small Deposits: If you only have a small deposit to put down, a guarantor mortgage can make it easier to get onto the property ladder.

Who can be a guarantor for a mortgage?

A guarantor needs to meet certain criteria to be accepted by a mortgage lender. While specific requirements may vary between lenders, the general criteria often include the following:

Stable Income: Guarantors must have a stable and sufficient income that would allow them to cover the mortgage payments if the borrower cannot. This may include income from employment, self-employment, pensions, or investments.

Good Credit History: A guarantor generally needs a good credit history. Lenders will conduct a credit check to ensure the guarantor doesn’t have past defaults, County Court Judgments (CCJs), or a history of missed payments.

Equity in Property: Many lenders will require guarantors to be homeowners with a significant amount of equity in their property. This provides the lender with additional security, as the guarantor’s property could potentially be used to cover the debt if the borrower defaults.

Age Limit: Some lenders impose age limits on guarantors. For example, they may require that the guarantor be under a certain age when the mortgage term ends.

UK Residency: Many lenders require guarantors to be UK residents, although there are exceptions.

Financial Stability: Aside from a stable income and good credit history, a guarantor should generally have a solid overall financial situation. This includes a manageable level of debt and a history of responsible financial management.

Understanding of Obligations: Finally, a guarantor must fully understand and be willing to accept the responsibilities involved. They must be aware that they will be required to cover the mortgage payments if the borrower cannot and that their home may be at risk if they cannot make the payments.

Does my guarantor need to be a homeowner?

Most lenders prefer and often require, guarantors to be homeowners. This is because homeownership provides additional security to the lender, as the guarantor’s property could potentially be used to cover the debt if the borrower defaults on the mortgage payments.
If a guarantor owns their own home, it demonstrates that they have been able to manage a mortgage successfully, and it also means they have a tangible asset.

This is why homeownership is a common requirement for guarantors. It provides an extra layer of protection for the lender, as they could potentially take possession of the guarantor’s property if both the borrower and guarantor fail to meet the mortgage repayments.

However, it’s worth noting that criteria can vary from lender to lender, and some may accept guarantors who are not homeowners in certain circumstances.

Do guarantors get credit checked?

Yes, guarantors do get credit checked. When a guarantor agrees to back a borrower’s mortgage, they essentially agree to take on the debt if the borrower defaults on the repayments. Therefore, lenders need to be sure that the guarantor has a history of managing credit responsibly and is financially stable enough to cover the repayments if needed.

This credit check will typically involve reviewing the guarantor’s credit history, including any previous or current loans, credit cards, or other forms of credit. The lender will also look for any late or missed payments, defaults, or other negative marks on the guarantor’s credit report.

What happens if a guarantor can’t pay?

If a borrower defaults on a mortgage and the guarantor is unable to meet the repayments, this can lead to serious consequences. Here are the typical steps that might occur:

Late Fees and Penalties: Initially, the lender may charge late fees or penalties for missed payments. These will usually be added to the overall debt.

Credit Score Impact: Both the borrower’s and guarantor’s credit scores may be negatively affected by the missed payments. This could make it more difficult for both parties to obtain credit in the future.

Legal Action: If the arrears continue to accumulate and neither the borrower nor the guarantor can make the payments, the lender may decide to take legal action. This could include obtaining a court order to take possession of the borrower’s property (repossession) and potentially the guarantor’s property as well, especially if the guarantor’s property was used as security for the loan.

Property Sale: If the lender repossesses the properties, they will typically be sold to repay the debt. If the sale of the properties doesn’t cover the entire debt, both the borrower and guarantor could be pursued for the remaining balance.

Bankruptcy: In extreme cases, if the debt cannot be repaid and there are no other options, the borrower or guarantor might have to declare bankruptcy.

Does having a guarantor help you get a bigger mortgage?

Yes, having a guarantor can potentially help you get a bigger mortgage than you would be able to secure on your own.

A guarantor provides an additional level of security to the lender because if the borrower defaults on their mortgage repayments, the lender has another person (the guarantor) to call upon to fulfil those repayments. This additional security can mean lenders are more willing to offer larger mortgages or mortgages to people they might not lend to otherwise, such as first-time buyers, people with lower incomes, or individuals with less-than-perfect credit histories.

However, the specific amount you can borrow will depend on a variety of factors. These include the income and financial circumstances of both you and your guarantor, the value of the property you’re purchasing, the size of your deposit, and the specific lending criteria of the mortgage provider.

Keep in mind, however, that while having a guarantor might allow you to borrow more, it’s important to ensure that the repayments remain affordable.

What documents will my guarantor need to provide to the lender?

When acting as a guarantor for a mortgage, the guarantor will need to provide a number of documents to the lender. The exact documentation required may vary between lenders, but generally includes:

Proof of Identity: This typically includes a passport or driving licence.

Proof of Address: A utility bill, council tax bill, or bank statement can often serve as proof of address.

Proof of Income: The guarantor will need to prove they can afford the mortgage repayments if the borrower defaults. This often means providing payslips, bank statements, or tax returns.

Proof of Existing Financial Commitments: The lender will want to understand the guarantor’s existing financial commitments. This could involve providing details of current debts, loans, credit card statements or other mortgages.

Credit Report: The lender will typically perform a credit check on the guarantor to assess their creditworthiness. While the guarantor won’t need to provide this, they will need to give consent.

Proof of Homeownership (if applicable): If the guarantor owns their home, they may need to provide proof of this.

What are the eligibility criteria for guarantor mortgages?

The eligibility criteria for guarantor mortgages can vary depending on the lender, but typically they will look at the following factors:

Credit History: Lenders will conduct a credit check to assess the borrower’s financial history and reliability. They’ll look at any late payments, defaults, and other indicators of financial behaviour.

Income: The borrower’s income will be evaluated to ensure they can afford the mortgage repayments. This includes assessing the stability and reliability of the income.

Outgoings: Lenders will look at the borrower’s regular expenses to assess their affordability. This includes debts, bills, and other living costs.

Deposit: The amount of deposit the borrower can put down is also a key factor. The more the borrower can put down as a deposit, the less risk for the lender.

What are the top providers of guarantor mortgages?

Here are some UK lenders that traditionally offer guarantor mortgages or similar products:

 

1. 1. Halifax: Halifax has historically offered a range of products that may be suitable for borrowers with a guarantor.

1. 1. Barclays: Barclays offers a ‘Family Springboard Mortgage’, which allows a family member or loved one to support the borrower in buying a property.

1. 1. Lloyds Bank: Lloyds has a ‘Lend a Hand Mortgage’ where a savings account linked to the mortgage is used as security.

1. 1. Nationwide: Nationwide Building Society has been known to consider guarantor mortgages in certain circumstances.

1. 1. Tipton & Coseley Building Society: They offer guarantor mortgages provided that the guarantor has sufficient income to cover both their own financial commitments and mortgage repayments.

1. 1. Buckinghamshire Building Society: The society offers a ‘Family Assist Mortgage’, which is a type of guarantor mortgage.

1. 1. Family Building Society: Offers a ‘Family Mortgage’ that allows family members to use their assets to help secure a lower interest rate for the borrower.

How does a guarantor mortgage compare to a joint mortgage?

A guarantor mortgage and a joint mortgage are different types of home loans, each with its own benefits and drawbacks. Here are some key differences:

Guarantor Mortgage:

Parties Involved: In a guarantor mortgage, the guarantor agrees to cover the mortgage payments if the borrower defaults. However, the guarantor does not share ownership of the property.

Credit Impact: The mortgage is typically in the borrower’s name, so it’s their credit that is primarily affected by the loan. However, if the borrower defaults and the guarantor can’t cover the payments, the guarantor’s credit could also be impacted.

Risk to Guarantor: The guarantor takes on significant risk, as they are responsible for the mortgage if the borrower cannot make the payments. However, they don’t share in the ownership or potential increase in the value of the property.

Joint Mortgage:

Parties Involved: In a joint mortgage, two or more individuals co-own the property and are jointly responsible for the mortgage payments. All parties have a stake in the property.

Credit Impact: All parties on the mortgage are equally responsible for ensuring payments are made, and all will have the mortgage noted on their credit reports. Missed payments can impact everyone’s credit.

Risk and Reward: All parties share in both the responsibility of the mortgage and the potential increase in value of the property. However, disagreements between parties can complicate things, especially if one party wants to sell their share or can’t make their portion of the mortgage payment.

A guarantor mortgage can be helpful for individuals who can’t secure a mortgage on their own, while a joint mortgage might be a good option for partners, friends, or family members who want to share in the ownership of a property. However, both types come with potential risks and should be considered carefully.

How does a guarantor mortgage affect the guarantor’s credit score?

Being a guarantor on a mortgage can potentially affect the guarantor’s credit score in certain circumstances:

 

1. 1. Initial Credit Check: When you agree to be a guarantor, the lender will perform a credit check to assess your financial history. This check will leave a ‘footprint’ on your credit file. While this doesn’t necessarily negatively impact your credit score, if you have several credit checks in a short span of time, it could potentially lower your score slightly.

1. 1. If Payments Are Missed: As a guarantor, you’re responsible for making the mortgage payments if the borrower defaults. If this occurs and you’re unable to make the payments, this default will be recorded on your credit file and could significantly decrease your credit score.

1. 1. Debt-to-Income Ratio: While being a guarantor doesn’t technically increase your debt, lenders may take it into account when assessing your debt-to-income ratio for your own borrowing purposes. This could potentially affect your ability to get further credit, such as a personal loan, another mortgage, or a credit card.

Will my guarantor own my property?

No, being a guarantor for a mortgage does not give the guarantor ownership over the property. The guarantor’s role is to promise to cover the mortgage payments if the borrower is unable to pay. This agreement provides additional security to the lender, but it does not confer any ownership rights to the guarantor.

The property’s ownership is solely with the borrower, even though the guarantor has a legal obligation towards the mortgage. This is one of the key differences between being a guarantor and being a co-owner (or joint mortgage holder), where the latter would imply shared ownership of the property.

Can I get a 100% mortgage with a guarantor?

100% mortgages (mortgages that cover the entire property cost without requiring a down payment) had become quite rare in the UK, particularly following the financial crisis of 2008. However, some lenders have been known to offer them under certain conditions, often involving a guarantor.

In such cases, the guarantor (often a parent or close family member) agrees to cover the mortgage repayments if the borrower cannot pay. The guarantor might be required to put up their own home or savings as security, meaning they risk losing these if the borrower defaults on their loan.

Can a guarantor stop being a guarantor for a mortgage?

Typically, once a person agrees to be a guarantor for a mortgage, they are legally obligated to uphold their responsibilities for the duration of the loan term. However, there are certain circumstances where a guarantor might be released from their duties:

Refinancing the Mortgage: The borrower may be able to refinance the mortgage in their own name if their financial situation improves (such as a higher income or better credit score). This would effectively remove the guarantor from the agreement.

Repayment of the Mortgage: If the mortgage is paid off, either through monthly repayments or a lump sum payment, the guarantor’s obligation will end.

Negotiation with the Lender: In some cases, the lender may agree to release a guarantor from their obligations. This typically only happens if the borrower can demonstrate they’re financially stable enough to handle the mortgage on their own.

Sale of the Property: If the property is sold and the mortgage is paid off with the proceeds, the guarantor is released from the agreement.

What happens if my guarantor dies?

If a guarantor for a mortgage dies, the situation may vary depending on the specific terms and conditions of the mortgage agreement. However, there are a few common scenarios:

The Obligation Passes to the Guarantor’s Estate: Depending on the agreement’s terms, the guarantor’s obligations might pass to their estate after they die. This means that their estate would be liable for the debt if the borrower defaults on the loan.

Insurance Covers the Mortgage: In some cases, the guarantor may have life insurance that could pay out to cover the remaining mortgage balance. This would depend on the specifics of the insurance policy.

The Lender Might Ask for a New Guarantor: Depending on the mortgage agreement and the lender’s policies, the lender might require the borrower to find a new guarantor.

The Mortgage Becomes Due: In some cases, the lender might have the right to call the entire loan due if the guarantor dies. This means that the borrower would have to pay back the entire loan immediately or risk foreclosure.

The specifics can vary considerably based on the mortgage agreement, the lender’s policies, and local laws, so it’s important for both the borrower and the guarantor to understand what would happen in such a situation.

Can I get a guarantor mortgage for a buy-to-let property?

It’s relatively rare to find a buy-to-let mortgage that accepts a guarantor. This is because buy-to-let mortgages are generally assessed on the potential rental income from the property rather than the borrower’s or guarantor’s income.

However, it’s not entirely impossible. Some lenders may be willing to consider a guarantor for a buy-to-let mortgage under specific circumstances, such as a close relative guaranteeing the mortgage for a family member.

If you’re looking into this option, it would be best to discuss it with a mortgage broker who has access to a wide range of lenders and products. They may be able to guide you towards a lender that could accommodate your specific circumstances.

Can I use a guarantor mortgage to buy a property at auction?

Yes, you can potentially use a guarantor mortgage to buy a property at auction. However, buying a property at auction comes with specific challenges and timing issues that you need to be aware of.

If you successfully bid for a property at auction, you’ll typically need to pay a deposit immediately (usually 10% of the purchase price), and then the balance is often due within 28 days (though this can vary depending on the auction terms). This means you’ll need to have your financing arranged in advance and be confident that it can be finalised within that timeframe.

Guarantor mortgages, like all mortgages, can take several weeks or even months to finalise because they involve a significant amount of paperwork and other checks, such as property valuations and surveys. Therefore, if you’re planning to use a guarantor mortgage to buy a property at auction, you should start the application process well in advance of the auction date.

Also, keep in mind that your guarantor will need to understand the risks involved, as they will be liable for the mortgage repayments if you are unable to meet them.

It’s also important to note that not all properties sold at auction may meet the criteria for a mortgage. Some properties at auction may be in poor condition or have other issues that can make them unsuitable for mortgage lending.

Before bidding at auction, you should seek advice from a solicitor and a mortgage advisor and potentially get an agreement in principle from your lender.

Can I get a mortgage if my guarantor is retired?

Yes, it is typically possible to get a mortgage if your guarantor is retired, as long as they meet the lender’s criteria. The lender will want to be sure that your guarantor can afford to cover your mortgage repayments if necessary.

Here are a few factors that lenders might consider when evaluating a retired guarantor:

Income: Even though your guarantor is retired, they must still show they have a sufficient and steady income. This could come from a variety of sources, such as pensions, investments, rental income, or part-time employment.

Savings and Assets: The lender will likely take into account the guarantor’s savings and assets. This could include money in savings accounts, property, and other investments.

Age: Some lenders have maximum age limits for guarantors. This is because as a guarantor gets older, their income may decrease, and their risk of health issues may increase, which could affect their ability to cover your mortgage repayments.

Credit History: The guarantor’s credit history will be a significant factor. Lenders will be looking for guarantors with a strong history of managing credit responsibly.

Can you get guarantor mortgages with bad credit?

While it’s generally more difficult to secure a mortgage if either the borrower or guarantor has bad credit, it’s not impossible. Some lenders specialise in “bad credit” or “adverse credit” mortgages and may be willing to consider applications even with a poor credit history.

In a guarantor mortgage, the lender is likely to take both the borrower’s and the guarantor’s credit histories into account. If the guarantor has good credit, they may offset some of the risk associated with the borrower’s bad credit. However, if both the borrower and the guarantor have bad credit, it can be quite challenging to secure a mortgage.

If you or your guarantor has bad credit, there are a few steps you can take to improve your chances:

 

1. 1. Check Credit Reports: Before applying, both you and your guarantor should check your credit reports for errors and correct any that you find.

1. 1. Improve Credit Scores: You can also work on improving your credit scores before applying. This can involve steps like paying bills on time, reducing outstanding debt, and not applying for new credit.

1. 1. Save a Larger Deposit: The more you can save for a deposit, the less risk the lender takes on. This may make them more likely to approve your application, even with bad credit.

1. 1. Consider Specialist Lenders: Some lenders specialise in mortgages for borrowers with bad credit. A mortgage broker can help you find these lenders.

Can I remortgage with a guarantor?

Yes, it is possible to remortgage with a guarantor, but it will depend on the individual circumstances, the lender’s criteria, and why you’re considering this option.

When you remortgage, you’re essentially taking out a new mortgage to replace your existing one, often to secure a better interest rate or release equity from your property. If you’re considering remortgaging with a guarantor, it could be because your financial situation has changed, and you need the extra support to meet the lender’s criteria.

Here are a few factors to consider:

 

1. 1. Lender’s Criteria: Not all lenders offer guarantor mortgages, and those that do will have their own specific criteria. Some might not accept guarantors for remortgage applications, while others might.

1. 1. Guarantor’s Financial Position: Your guarantor must be in a strong enough financial position to be able to afford the mortgage repayments if you’re unable to do so. They’ll also need to have a good credit history.

1. 1. Your Equity: The amount of equity you have in your home may also influence your ability to remortgage with a guarantor. More equity generally makes it easier to secure a mortgage.

1. 1. Reason for Remortgaging: If you’re remortgaging to get a better deal but need a guarantor due to a change in your circumstances, it’s important to discuss these changes with potential lenders. If you’re remortgaging to release equity, the lender will want to know what the money will be used for.

Can being a guarantor affect getting a mortgage?

Yes, being a guarantor can potentially affect your ability to get a mortgage in the future. Here’s how:

 

1. 1. Liability: When you become a guarantor for someone else’s mortgage, you essentially take on the liability of their loan. If the primary borrower defaults on their mortgage, you’re expected to make the repayments.

1. 1. Debt-to-Income Ratio: Lenders look at your debt-to-income ratio when assessing your mortgage application. Being a guarantor can impact this ratio, as some lenders may consider the guaranteed loan as a financial commitment, even if you’re not currently making repayments on it. This could reduce the amount you’re able to borrow.

1. 1. Credit Score: If the borrower defaults on the mortgage you’ve guaranteed and you’re unable to cover the repayments, it can negatively impact your credit score. A lower credit score can affect your ability to secure a mortgage or other loans in the future.