A Guide to Finding the Right Guarantor

Securing a mortgage is an important step towards owning a house, and having a guarantor can be a big help – especially if you have poor credit history or low annual income. 

But you may be asking yourself how to find a guarantor.

This guide from Finance Rate is here to give you a complete understanding of how to find the right guarantor.

Information surrounding mortgages can be intimidating if you’ve never faced it before – Finance Rate is here to be your handy guide and help you make financial decisions with confidence. Let’s get started!

Understanding the role of a guarantor

A guarantor is like a safety net for the people who lend you money. Basically, if you can’t pay your mortgage, they step in and pay it for you. This extra bit of reassurance makes the lenders feel safer about giving you the money because they know someone else will pay if you can’t.

Qualities to seek in an ideal guarantor

When you’re in the process of choosing someone to be a guarantor for your mortgage, there are several important factors to keep in mind:

  1. Financial Stability: A dependable guarantor will need to provide proof of income to show a lender they have steady and reliable finances. They may be subject to a credit check during the application process, so they should have a good credit score and be financially responsible, with no late monthly payments or outstanding debts from personal loans. Additionally, they should have the financial means to step in and cover your mortgage payments if the situation requires it. This financial security gives lenders confidence and reduces the risk associated with lending to you.
  2. Property Ownership: While not an absolute requirement, some lenders might prefer a guarantor who owns their own property. This ownership indicates a certain level of financial stability and responsibility. It suggests that the guarantor understands the commitments involved in property ownership and is more likely to fulfil their obligations as a guarantor.
  3. Relationship: Family members such as parents or grandparents are often chosen as guarantors due to the strong bonds of trust within these relationships. Lenders value the inherent trustworthiness that comes with close family ties, as it increases the likelihood of the guarantor stepping in if needed.
  4. Age: Typically, lenders expect guarantors to fall within a specific age range, typically between 21 and 70 years old. However, this range can vary depending on the specific policies of the lender. The rationale behind this age range is to ensure that the guarantor is financially stable and capable of fulfilling their commitment throughout the mortgage term.
  5. Understanding the Role: A strong candidate to be a guarantor should fully grasp the responsibilities they are taking on. They need to be aware of the potential financial implications of guaranteeing your mortgage. This includes understanding that they might need to cover mortgage payments if you are unable to. Being willing to step in when necessary is a crucial aspect of being a guarantor and is something your chosen guarantor should be prepared for.

Maintain open communication with a guarantor

Before you ask someone to be your guarantor, it’s important to have an honest and clear talk with them. Explain your situation in a straightforward way, tell them why you need a guarantor, and talk about the possible risks. Make sure they’re okay with the idea and that they get answers to any questions they might have. This helps everyone understand what’s going on and feel comfortable with the plan. 

Exploring mortgage options with different guarantor requirements

Different lenders have different rules and criteria for their preferred guarantors. These might include particular requirements or qualities they like. 

So, looking for lenders whose rules match your and your guarantors’ situation can streamline the process and help improve your chances of getting an appropriate mortgage.

Seeking professional guidance with a guarantor agreement

Getting help from legal and financial professionals in setting up a guarantor agreement is helpful – an official agreement explains what both people have to do, makes things clear and protects everyone’s interests. 

Understand how guarantor mortgages work

A guarantor mortgage works by using someone else’s home as a form of ‘security’. This means that if neither the borrower nor the guarantor can manage the borrower’s mortgage payments, the lender has the right to sell the guarantor’s property. This helps the lender feel more secure, as they won’t lose money even if the monthly mortgage payments aren’t made.

The person who agrees to be a guarantor becomes part of the legal paperwork, agreeing to make payments if the borrower can’t. However, they won’t actually become an owner of the property and their name won’t be on the property deeds.

Normally, the guarantor has to offer their own property as ‘security’. So, if neither the borrower nor the guarantor can make the payments, both of their homes might be at risk of being sold.

A guarantor mortgage may suit you if:

  • You’re struggling to save enough for a deposit
  • You have little or no credit history, for example, if you’ve never used credit cards or if you’re new to the country
  • You have a poor credit score

Sometimes guarantor mortgages can be available as a 100% mortgage with no deposit necessary.

If you can’t get a guarantor, consider alternatives

If you aren’t in a position to find an ideal guarantor, or if the task is too time-consuming or challenging, exploring alternative avenues is another option. Government-backed schemes are out there, as are joint mortgages.

Saving for a larger deposit is another way to enhance your mortgage prospects without a guarantor.

Here to help with your multiple mortgage questions

Let Finance Rate, make the property buying process feel less overwhelming. We aim to be your free-to-use resource to give you the facts and help inform you to make more confident decisions.

If you have other financial quandaries, such as taking out a personal loan, or managing your pensions, we’re here to be your free-to-use, handy guide for all things finance.