A Guarantor Mortgage allows a third party (maybe your parents) to underwrite your mortgage repayments and obligations. But why would you want that?
Well, if you need a mortgage and you can’t get one this is worth considering. Perhaps your lender is concerned about whether you can afford the mortgage or they have concerns about your employment history? If so, one option is to offer them a guarantor who will guarantee to take on your mortgage obligations if you default.
This type of mortgage can be useful when a parent wants to help a son or daughter get onto the property ladder. However, there are risks associated with this type of mortgage as the guarantor is liable for any defaults. Their own home might even be at risk if they fail to cover their commitments.
As an alternative to a Guarantor Mortgage, it might be worth Mum and Dad participating in the purchase by buying part of the property and taking on part of the equity. On this basis it would be reasonable that they receive rent on the proportion of the property they own. Of course, shared equity purchase isn’t new but the big advantage is that, as a joint owner, your co-owner might introduce a larger deposit meaning that your mortgage is available on better terms. Also, as with a Guarantor Mortgage, your co-owners can also responsible for the mortgage repayments but with shared ownership at least they own part of the property!
In any event, what is becoming clear is that with ever-rising property prices the lenders and the UK Government are keen to introduce new ways for people to get on the property market. The Guarantor Mortgage is one such instrument.
Anyone considering a mortgage should contact an Independent Mortgage Adviser. Contact Mortgage Required on 01628 507477.
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