05/05/2023
How do guarantor mortgages work? "A guarantor mortgage uses someone else’s home as ‘security’ – the lender can forcibly sell this property if neither the guarantor nor the borrower can keep up with the borrower’s mortgage repayments. This reduces risk for the lender, as it ensures they won’t be out of pocket even if the monthly mortgage payments aren’t made. The person who agrees to be a guarantor adds their name to the legal documents, agreeing to make repayments if the borrower can’t. They won’t actually be on the title deeds of the property, and they won’t own any share of it. The guarantor usually has to use their own property as ‘security’ – so if neither the mortgage borrower nor the guarantor can make the repayments, then both their homes may be at risk. Some guarantor mortgages use savings rather than property. This can work in a few ways, for example: The guarantor puts cash into a special savings account to hold as security against the mortgage. If the mortgage misses too many payments and goes into default, then money is taken from there to pay it off. The savings account can still get some interest, and if there’s no need to use it to help deal with the mortgage, then it can work as a regular saving account. The guarantor puts money into an account linked directly to the mortgage, making monthly repayments cheaper. However, there’s no interest paid, and the guarantor can usually only get their money back when the mortgage is paid, or almost fully paid off." (Experian, 2023). Do you need help with looking for a mortgage? If so, call us today on 01493 249595 and we will put you in the right direction.
