Can a Parent Be a Guarantor on a Mortgage?
Answered on 31 July 2019
Can I be a guarantor on my child’s mortgage? And is there a mortgage guarantor age limit?
Parents can be guarantors for their child’s mortgage. While there’s no specific product called a “parent guarantor mortgage”, a lot of lenders actually prefer guarantors to be parents or other family members. Different lenders have different criteria for mortgage guarantors regarding their relationship to the borrower, the guarantor’s age, income and whether they have a mortgage on another property.
What Is a Guarantor Mortgage?
Guarantor mortgages are typically straightforward repayment mortgages, which are secured against the property you – or your child – is purchasing. The buyer puts down a deposit and pays back part of the mortgage balance each month, with interest. What’s special about them is that they allow parents – or other relatives – to act as guarantors for the borrower without being added to the title deeds.
When you act as guarantor for a mortgage, you guarantee to meet the mortgage payments if the borrower can’t.
The guarantor is assessed like a full mortgage applicant, which means the lender takes the guarantor’s income into account, alongside the borrowers, when considering the application.
It’s worth noting that when you act as guarantor, you don’t need to put down any deposit and no charge will be added to your property; the mortgage is only secured against the property your child is using the loan to purchase.
Who Are Guarantor Mortgages Useful for?
Guarantor mortgages are useful for:
- First-time buyers and people with low incomes
- Someone who wants to purchase a property that costs more than they can afford on a typical mortgage
When Isn’t a Guarantor Mortgage Suitable?
A common issue you may find with a guarantor mortgage is that, even with your help as guarantor for your child, the amount they want to borrow far exceeds what a lender would normally lend to them. This is because the lender would expect the borrower’s earnings to rise fairly quickly, to a level that allows them to take over the mortgage completely and release the guarantor, which lenders don’t always deem to be likely.
If you’re happy and able to be on the mortgage as a guarantor for the full term, you may want to look at joint borrower sole proprietor arrangements.
Alternatively, if you own your main residence already – and have plenty of equity in it - you may want to consider letting a lender place a charge on your home to raise the funds for your child to purchase the property.
Is There an Age Limit for Mortgage Guarantors?
Lenders have different requirements for who can act as a guarantor. Many enforce an age limit whereby the guarantor mustn’t reach their expected retirement age before the end of the mortgage term. This means the borrower might have to apply for the mortgage before their parent reaches a certain age, if they want that parent to guarantee their mortgage. If your parent is close to the age limit, then it’s likely you’ll have a very short mortgage term which would increase the monthly payments beyond a level you could afford.
You can find out more in our guide: Guarantor Mortgages Explained.
Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.