Can You Be a Guarantor for a Buy-to-Let Mortgage?
In theory, it can be possible to act as a guarantor for a buy-to-let mortgage, but in practice it is quite rare.
Guarantor mortgages still exist in parts of the residential market, often where family members want to help a child or relative buy a home. In the buy-to-let space, however, fewer lenders are willing to structure cases this way.
That means the idea is not impossible, but the options are likely to be much more limited than they would be for a standard residential mortgage.
Are Buy-to-Let Guarantor Mortgages Available?
Some lenders may consider more specialist arrangements, but buy-to-let guarantor mortgages are not widely available.
This is because buy-to-let lending is usually assessed differently from residential borrowing. Rather than relying mainly on the borrower’s personal income, lenders focus more heavily on the expected rental income from the property and whether that income comfortably covers the mortgage payments.
For that reason, many lenders would prefer the case to stand on its own merits rather than bring in a guarantor.
Can a Son Get a Buy-to-Let Mortgage in His Sole Name?
Depending on his age, circumstances and the property itself, your son may be able to get a buy-to-let mortgage in his own name without needing a guarantor.
That is because lenders are often more interested in whether the anticipated rent is enough to support the mortgage than whether the borrower’s salary alone could cover the full debt.
So if the rental figures are strong enough and the rest of the application fits policy, a sole-name buy-to-let mortgage may be the more straightforward route.
How Do Lenders Assess Affordability on a Buy-to-Let Mortgage?
With a buy-to-let mortgage, lenders usually want the monthly rental income to exceed the mortgage payment by a set margin.
A common benchmark is around 125% of the monthly interest payment, although this can vary depending on the lender, the applicant’s tax position and the product chosen.
That rental calculation is often one of the main factors in determining whether the case is viable. If you want to get a sense of what may be required, you can use our minimum rent calculator.
What Are the Tax and Legal Points to Consider?
If you act as a guarantor, your name would not usually be on the property title.
That means ownership of the property would remain with your son, and any future Capital Gains Tax liability on a sale would normally be his to consider rather than yours.
That said, acting as a guarantor is still a serious legal commitment. If the borrower cannot keep up with the mortgage, the guarantor may be called on to step in. This is why it is important to understand exactly what you are agreeing to and take advice before proceeding.
Speak to John Charcol About Buy-to-Let Mortgage Options
While guarantor arrangements for buy-to-let mortgages are uncommon, there may still be other ways to make a case work depending on the borrower, the property and the rental income.
At John Charcol, our independent mortgage advisers can help explore the options and identify whether a sole-name buy-to-let mortgage or another route may be more suitable.
To discuss the situation in more detail, speak to one of our independent mortgage advisers on 023 8235 2300.
