How do guarantor mortgages work?
If you earn £25,000 a year and want to buy a property worth £100,000, but your lender will only give you a mortgage of £75,000, that leaves you with a shortfall of £25,000. So long as the guarantor's income allows them to afford the monthly repayments for a £100,000 mortgage - and not just the shortfall - then they will usually be eligible to guarantee your mortgage. Once you are comfortable with the idea of meeting the repayments yourself, without a safety net, the guarantor can be released from the agreement.
While having a guarantor allows you to get on the property ladder when you otherwise wouldn't have been able to, having a family member enter into a legally binding agreement with you, should be treated with caution. If you are considering the guarantor option, you should seek legal advice beforehand and bear in mind that there is a lot more at stake than just your finances.
100% mortgages
Earlier this year most of the lenders offering 100% or 100%-plus mortgages pulled their products from the market. As a result, the only 100% mortgage deals currently left are guarantor mortgages.
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