What is a Guarantor Mortgage?

This is a mortgage where a certain percentage of the loan or mortgage on the property is guaranteed to be paid off by a third party i.e. the guarantor, such as a parent of an adult child who is seeking the mortgage.

There are several types of guarantor mortgage schemes ranging from a guarantee for the shortfall only of the borrowed amount to the whole amount borrowed.

The important distinction here is that the Guarantor will also be assessed on the basis of affordability as well as the applicant.

Types of Borrower

These forms of mortgages are primarily designed for first time buyers, who may be on low incomes and also have insufficient personal savings to raise a large deposit, but with parents with sufficient income and/or capital to pay for the mortgage.

Reasons for Mortgaging

You could be borrowing money to purchase your first property where outright purchase with a prime mortgage is outside your current income and savings.

Types of  Mortgage Repayment Methods

When you take out a mortgage or loan, you and the guarantor will need to have agreed with the lender how you are going to repay it.

As the borrower you and the guarantor have two main options when considering the method of repaying the loan. Over the term of the loan, you can make monthly repayments consisting partly of capital and partly of interest – i.e. Capital repayment mortgage or you can pay interest only every month, leaving the capital to be repaid at the end of the loan term.

How do I get a Guarantor Mortgage?

The first and most important step after you have decided you may want this type of mortgage is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable mortgage is for your particular circumstances we make an application on your behalf to take out a loan based on how much you can afford and the value of the property, for a length of time agreed between you and the lender.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the free download publication from the Financial Services Authority titled ‘Helping you choose the right mortgage’ by accessing the following website www.moneymadeclear.fsa.gov.uk