Some lenders may even require your guarantor to be a family member. Not anyone can be a mortgage guarantor. Some lenders insist that the mortgage guarantor must have fully paid off their own mortgage, while some will settle for a certain amount of equity in it, e.g. they’ve paid over 50% of the full amount.
Thereof, are guarantor Loans a Good Idea?
It’s good for those with poor or little or no credit history
A guarantor loan allows those with poor credit history to add security to their repayments and so are a great option for those with bad credit. It’s also commonly used for those with little or no credit history, such as young adults buying their first home.
Furthermore, can you get 100 mortgage with a guarantor?
As you won’t need to provide a deposit, most 100% mortgages are guarantor mortgages. This means you’ll usually need a friend or family member to provide the lender with some security by acting as your guarantor.
Do guarantors have to pay anything?
Fortunately, guarantors are only liable to repay the amount they guarantee and once that amount is repaid, they are released from further liabilities.
How much money do you need to earn to be a guarantor? Usually guarantors are expected to be making at least three times the annual rent price of the property in order to be accepted by the letting agent or private landlord.
Your guarantor’s equity: The guarantor needs to have enough equity in their property to fund 20% of the new property’s value. Some lenders will allow up to 27% to be used to cover associated costs such as stamp duty and legal fees.
Having a guarantor means that the loan or agreement has a higher chance of being approved and much more quickly. Most likely, it can allow for borrowing more and receiving a better interest rate. Though loans with guarantors tend to have higher interest rates.
What happens if a guarantor dies? If a guarantor dies, the debt does not die with them. Instead, the guarantor’s estate can be liable. In this situation, legal advice should be sought.
A guarantor is a third party who ‘guarantees’ a loan, mortgage or rental agreement. This means they agree to repay the total amount owed if the borrower or renter can’t pay what they owe. By guaranteeing the agreement, you become responsible for any arrears that occur.
Being a guarantor involves helping someone else get credit, such as a loan or mortgage. Acting as a guarantor, you “guarantee” someone else’s loan or mortgage by promising to repay the debt if they can’t afford to.