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The Mortgage Lady  - first choice for guarantor mortgage and insurance advice
Parental or family assistance in the form of a mortgage guarantor is becoming more common
A personal approach to guarantor mortgages and associated insurance advice

Phone me now on:

0330 999 1955

for a free, no commitment, consultation on guarantor mortgage options and issues.

Janet Hall CeMAP - available to help you with your guarantor mortgage arrangements
Janet Hall, 115 The Street, Crowmarsh Gifford, Wallingford, Oxon OX10 8EF. Tel: 0330 999 1955
See 03309991955 on Twitter

Guarantor Mortgages

Using family members as guarantors for a mortgage  can address  lack of deposit, enable lower mortgage costs or even assist with poor credit issues.

High house prices and the impact of the credit crunch on high LTV mortgages mean that more and more first time buyers, young families upsizing and those hit by divorce or separation are finding it necessary, or simply more financially efficient, to turn to ‘The Bank of Mum and Dad’.

Cross financing within the family can be extremely beneficial and is simply viewed by many as an early inheritance.

There are many different structures available to achieve this cross financing and careful consideration of all options in light of the circumstances of all parties to the arrangement, together with

other family members whose interests might be affected, is necessary. I am happy to work directly with all the involved parties to ensure they understand and are comfortable with the final arrangements.

The solution - and selection of the best lender/structure - is vital and in advising on this I will need to fully understand the circumstances and wishes of everyone involved and potentially affected by the arrangements.

It is often possible (where the family member wishing to provide support has suitable income - see the section on ‘Mortgage over 65’ with relation to support from parents) for them to use a mortgage, assuming they do not have the cash funds available, to gift the deposit to the family member.

How do guarantor mortgages work ?

Where the raising of a mortgage by the family member providing support is not possible or not a route they wish to use, there are guarantor structures enabling co-ownership and/or simple payment guarantor and/or guarantee by way of second charge on property options available . The selection of the most appropriate will depend upon a variety of factors.

There are also structures designed specifically for parents to fund under their own ownership (with options to transfer subsequently in some cases) a second property to be used by family, perhaps while children are at university and subsequently sell or convert to traditional buy to let.

In all options, carefully consideration should be given as to how such arrangements will be disentangled in the future and how everyone will be protected in the event of a change of circumstances

Do guarantor mortgages overcome bad credit ?

Not as such - this is not the main purpose of guarantor mortgages and no lender is simply going to lend to a previously errant borrower simply because ‘daddy - or anyone else - will pick up the bill when it goes wrong again’. The main purpose of guarantor mortgages is to enable borrowing at a higher loan to value (indeed a limited number of 100% mortgages are available in certain circumstances) or at higher multiples of current income than might normally be available.

Having said that there are some areas of assistance where parental or family involvement can help to overcome mild adverse credit in a borrower’s history which normally might not be accepted for standard borrowing.

new

100% loan to value mortgage - with secured family loan for deposit

Understandably, not all parents are happy to see a charge against their own home (presumably having worked over the years to get to a minimal mortgage or that treasured ‘mortgage free status’) - and guarantor mortgages tend to be more expensive across the whole borrowing than standard mortgage products.

While the great majority of mortgage lenders it is not acceptable for you to ‘borrow your deposit’ - any parental or family assistance must be as a gift (which again not all parents are happy to do), however .....

We now have a lender willing to accept a formal family loan providing up to 100% of the deposit, an arrangement which offers many advantages, including:

  • Lower interest rates because of lower loan to value on main mortgage
  • Family member is secured (second charge) on your new property
  • Family member receives interest (rate of your choice) on their loan
  • Family member has no liability on their assets - their only risk is the loan (which is secured)

This arrangement is fully declared to - and approved by - the lender. The loan is a formal agreement and fully documented (provided by ourselves). The family member is protected by a formal secured second charge (the mortgage lender takes preference) registered with the land registry for England and Wales.

Please note: The borrower must be able to afford the payments on both the mortgage and family loan (as well as any other outstanding credit arrangements) calculated in accordance with both the lender’s and our own affordability guidelines.

Please note: We will charge an additional (above our standard broker fee) 150 for advising on and setting up the family loan. Both the family member making the loan and the borrower will require additional legal advice/services in setting up the loan arrangement - both parties should budget approximately 150 for this.

In summary, should you feel that your circumstances - for whatever reason - would make a ‘standard mortgage’ difficult for you to obtain, but you have family members who would consider assisting, please call me a call on 0330 999 1955 for a no commitment chat about the guarantor mortgage and other options that may exist for you.

THERE MAY BE A FEE FOR MORTGAGE ADVICE - TYPICALLY 250 FOR A REMORTGAGE AND 350 FOR A PURCHASE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENT ON YOUR MORTGAGE.
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Janet Hall is an appointed representative of TenetLime Ltd which is authorised and regulated by the Financial Services Authority.
TenetLime Ltd is entered on the FSA register (www.fsa.gov.uk/pages/register) under reference 311266.
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