Guarantor mortgages explained
Get the mortgage you require with the help of a guarantor
Getting onto the housing ladder is now harder than ever due to house prices maintaining their value and wages still not catching up, in fact wage levels are arguably falling further behind. The average age for first time buyers in the UK is now 36, which is having the effect of maintaining the rental market, pushing up rental prices and so stopping people from being able to save up for a mortgage deposit. However all is not lost as there is now an option that could help you to get onto the housing ladder without a deposit.
What is a guarantor mortgage?
What is this type of mortgage?
A guarantor mortgage is a type of no-deposit mortgage, which means you won’t need a deposit for your mortgage. What you will need is a family member, or friend, who is willing and able to guarantee 25% of the value of your property in place of a deposit. Lenders are now highly risk averse and so will not even begin to contemplate a 100% loan to value mortgage on its own. By having a guarantor, the risk is lessened and this then becomes an acceptable deal for the lender. If you keep up with your mortgage repayments then the guarantor will never be affected by their decision to be your guarantor. They will only play a part if you fall behind on your mortgage payments and your home ends up being repossessed. The sale of your home will be used in the first instance to repay the loan, but if there is any shortfall, your guarantor will be liable to make up the difference up to 25% of the property value.
What sort of deals are there?
In terms of 100% loan to value mortgages your options are gradually widening depending upon the size of the loan you are looking for. Most of the fixed rate deals offer you around the current standard variable rate of lenders, which means that you will still be getting a good deal because you will be protected from interest rate rises over the two or three years that your rate is fixed for. If you shop around you will find that some deals are better than others and some even have no arrangement fees. Others have more standard arrangement fees, so you will need to make sure that you take all of these elements into account.
What you need to do to prepare
Good preparation is essential
No matter what type of mortgage you are looking for you will need to have your financial information in order to be able to apply for a mortgage. You will need proof of income, details of any other loans or credit card debts you currently have and the amount you pay on those. You should also spend some time considering how you will meet payments in the future, possibly in the form of either life insurance or savings. In order to make sure you get the best deal for you, you should consult a mortgage broker.