How to Be a Mortgage Guarantor

Guarantor mortgages were primarily for first time buyers. They allowed parents or other family members to act as a guarantor for the borrower, without being a named owner of the property. The guarantor agreed to meet the monthly capital and interest payments in case the borrower couldn’t. Guarantor mortgages were repayment-based loans. Repayment mortgages are where you pay back a portion of your mortgage loan each month, together with the interest.

Guarantor mortgages were helpful for first time buyers looking to get on the property ladder who would otherwise face issues with affordability criteria during the mortgage application process. Increasing affordability also meant the borrower could potentially take out a larger mortgage.

For these reasons, guarantor mortgages were useful for those on a low income or with a poor credit rating, as well as for buyers who wished to purchase a property that cost more than they could otherwise afford with a standard mortgage.

Applicants for guarantor mortgages would often run into the same problem: the requested loan amount significantly exceeded what the lender would otherwise lend to the borrower with a standard mortgage. The assumption with guarantor mortgages was that the borrower would fully take over the mortgage at some point. However, if the borrower’s earnings were not likely to rise sufficiently, the lender may have considered the application to be too high risk.

Guarantor mortgages were also not suitable for borrowers looking for a boost in deposit. The guarantor only agreed to meet the monthly payments if the borrower couldn’t.

For those who would be comfortable sponsoring an application in a similar way to a guarantor, you may want to consider the alternative that we use nowadays: joint borrower sole proprietor.

Various lenders had guarantor products for first time buyers, although the rules differed from lender to lender. Some allowed a parent or guardian, a grandparent, a spouse or other relative to be a guarantor. However, other lenders only allowed the parent, guardian or grandparent of the borrower to be a guarantor.

It’s pretty similar with joint borrower sole proprietor. We explain this in detail below.

Although it was possible to find 100% loan-to-value guarantor mortgage products, most lenders required at least a 5% deposit. As well as the borrower, the lender examined the guarantor’s income as part of their affordability assessment during the application process.

The short answer is yes. Although guarantor mortgages aren’t available anymore, their replacement – joint borrower sole proprietor – is becoming more attractive to people on all sorts of incomes with different circumstances. This is because they allow the lender to consider additional forms of income for affordability, thereby increasing your maximum borrowing and making it more likely you’ll be able to afford a property.

A guarantor was required to sign a contract as part of the mortgage application in which they agreed to make the monthly payments if the borrower couldn’t. They didn’t need to provide security against the loan and were not on the title deeds of the property.

With joint borrower sole proprietor, all borrowers are equally responsible for making the monthly payments. The sponsor supporting the application doesn’t need to put up any security against the loan and is not on the title deeds of the property.

The main thing to bear in mind is that the person supporting the application has no ownership rights to the property.

Any sponsor – e.g. parent, step-parent, relative, etc. – supporting the mortgage application as guarantor or joint borrower is credit checked during the mortgage application process. Lenders will require a high score and a good credit history. A better credit rating will ensure there’s a greater likelihood that the application will be approved. The credit check performed on the sponsor is a hard credit check. Multiple hard credit checks can affect your credit score. Companies checking the guarantor’s or joint borrower’s credit history in the future will see this search query.

You can be a sponsor for a family member even if you already have a mortgage on your home. The lender will evaluate the sponsor’s disposable income as part of their overall affordability assessment, considering the sponsor’s own mortgage payments. Buy-to-let mortgages are ignored as they should be self-funding investments.