Guarantor mortgages can offer hope to first time buyers

First time buyers often struggle to get onto the property ladder and purchase their first home.  There is a type of mortgage that can help these potential buyers and it is a guarantor mortgage.  A guarantor mortgage is a type of mortgage where a relative, in most cases a parent is committed to pay the mortgage if the homeowner defaults on their payments.

The loan could be calculated on the guarantors’ income as well as the applicants, meaning that the mortgage may be more than the income multiple the applicant would be assessed on with a standard mortgage; although the applicant would have to prove they can meet the repayments. The guarantor may have to cover all of the debt which many lenders require, or maybe just part of the mortgage.  They would have to prove their income and outgoings, along with the ability to meet the repayments if they were called upon in the event of the homeowner not keeping up with the monthly payments.

As time passes and the financial personal circumstances of the homeowner improve it is possible to take full responsibility for the mortgage, with the lender allowing the guarantor to be freed from the mortgage.  Some lenders though may not guarantee to free the guarantor at any stage.  Therefore the implications of being a guarantor on this type of mortgage mean that this type of deal should not be taken lightly by either party.  The circumstances of the guarantor may change and being tied to a guarantor mortgage may affect future mortgage applications or other financial arrangements.

Rates and rules vary from lender to lender for this type of deal so it is really worth talking with a mortgage broker so the best deal can be got for the best interests of both parties, as this type of mortgage really can be a great way to get into the housing market with the initial help from a close relative.

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