Compare our best guarantor mortgages

You can get a guarantor mortgage without a deposit, or if your finances prevent you from getting another type of mortgage. Usually a guarantor must be a family member who can contribute some savings or use their house as security. Your guarantor must pay your mortgage if you cannot. Compare our best guarantor mortgages, or read our guide to learn about different types of guarantor mortgage.

Property price

£

Mortgage amount

£

Mortgage term

years

Initial rate type

Deal length

Repayment type

Our best guarantor mortgage rates

  • Lloyds Bank 2 Year Fixed mortgage

    Initial rate 4.4%. APRC 4.5%. Set-up fees £0
  • We've found 1 mortgage deals

    Lloyds Bank

    2 Year Fixed

    Initial rate

    4.4%

    until 31-01-2023

    APRC

    4.5%

    overall cost for comparison

    Set-up fees

    £0

    Monthly payment

    £1,100.34

    for 24 months

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    Representative example:

    If you borrowed £200,000 payable over 25 years, with an initial fixed-rate for two years at 4.79%, your monthly payments would be £1,144.84 for 24 months. This would then revert to a standard variable rate (SVR) of 4.24% for the remaining 23 years, costing £1,086.24 per month for 276 months. Overall cost for comparison is 4.5% APRC representative. The total amount payable over the full term would be £328,272, including product fee of £995 and interest of £127,277.

    Your home may be repossessed if you do not keep up repayments on your mortgage.

    Even with schemes such as Help to Buy many people are still struggling to get on the housing ladder.

    High property prices, particularly in major cities, lead to the need for huge deposits that are often unattainable for those hammering their cash on rent and day-to-day living costs.

    However, if you have a parent or a grandparent who is willing and able to help you, some lenders may still be able to offer you a mortgage without a deposit. One way to do this is via a guarantor mortgage.

    What is a guarantor mortgage and how does it work?

    A guarantor mortgage is a home loan which involves a third party – usually a parent or a grandparent – putting up security if the main borrower is seen as a risky investment for the lender.

    The third party guarantees to make good on the mortgage if the borrower gets into difficulty.

    This product usually sees the guarantor’s own home put up as security, meaning it can be repossessed if the worst comes to the worst, although sometimes guarantors pledge their savings as security instead.

    As with all mortgages, if there are no problems for the borrower, that security remains untouched. But giving the bank the option to ask the third party to make good on any default gives the lender more confidence to make the loan in the first place.

    Guarantor mortgages are one solution for borrowers who have a poor credit history or no credit history, or who are unable to put down a deposit. These borrowers are seen as being riskier for lenders to deal with, which is why they look for the extra security.

    With a traditional guarantor mortgage, it’s your name on the title deeds and you who’s the sole owner of the property. So you’ll need to cover costs such as stamp duty yourself.

    Your guarantor will most likely have their own home, so naming them on the deeds would constitute giving them a second home and send the rate of your stamp duty skywards. It would nullify the first-time buyer stamp duty relief and could mean you jointly pay an extra 3% on top of the normal rates for a first home. On the average £232k home, this could amount to £6,977. One way to avoid this charge is to opt for a joint borrower, sole proprietor mortgage as explained below.

    Is a guarantor mortgage right for me?

    A guarantor mortgage could be a good option for you if:

    • You have a small deposit (less than 10% of the purchase price) or do not have a deposit at all
    • You have a bad credit record
    • You have a low income and might struggle to meet the mortgage repayments

    The best loan for you depends on your own personal circumstances and those of your guarantor. Having a bad credit rating will still affect your chances of getting a guarantor mortgage. With this in mind, it’s worth trying to first improve your credit score before applying for any kind of mortgage, as a rejection will have a further negative impact on your credit record.

    It’s important that you take your responsibility as a borrower seriously – if you do not keep up with the mortgage payments, it could compromise your guarantor’s credit rating and could even cost them their home.

    Who can be a guarantor?

    It’s usual for a guarantor to be a family member, and this can sometimes be a requirement of the lender. Guarantors must own their own home and, if they are still paying their own mortgage, they will have to prove that they can cover the cost of both mortgages if the new borrower starts to fall behind on repayments.

    Guarantors also have their own credit records checked by the lender, even though it is not them who are borrowing the money. The lender needs to be sure that the third party standing behind the mortgage has a good track record.

    What are the different types of guarantor mortgage?

    In the past, the lender usually only let you borrow 75% of the purchase price, whereas now this can stretch to the full 100%, which makes them an option for borrowers with little or no deposit.

    Springboard or family deposit mortgages

    These require a family member to lodge savings in an account with the lender, worth an equivalent of between 10% and 20% of the property’s purchase price.

    The lender offers the purchaser a 95% mortgage or, in some cases, 100% of the property’s valuation or purchase price.

    The money in the savings account remains untouched if the mortgage repayments are made on time, and they earn interest in the meantime. But they are tied up with the lender for a minimum period of time in lieu of a deposit from the main borrower.

    Joint borrower, sole proprietor mortgages

    Some lenders allow a mortgage to be in joint names but the property ownership to be in one name. This means that even if the guarantor already owns a home, if it’s your first home you still qualify as a first-time buyer and you won’t have to pay the 3% stamp duty surcharge.

    These loans are similar to your average joint mortgage. They give the lender much more security because the lender can go after the guarantor if things go wrong.

    Family link mortgages

    Offered by the Post Office, this could be a good option for you if you do not have a deposit and your guarantor owns their property outright.

    Here, you’ll borrow 90% as a mortgage with 10% as a loan secured against your guarantor’s home.

    It’s worth noting rates are not as competitive as those of traditional repayment mortgages, so could end up costing you more in the long run.

    Family offset mortgages

    These work in almost exactly the same way as traditional offset mortgages, except that rather than using your own savings to offset your mortgage debt, you use those of a family member instead.

    Their savings are linked to your mortgage (both will need to be held with the same lender) and are deducted from it for interest purposes. For example, if your mortgage is £200,000 and your parents have £50,000 in savings, you pay interest on only £150,000 of the mortgage.

    As a result, you’ll either be paying less interest (meaning you could pay off your mortgage sooner), or you reduce your monthly repayments, making your mortgage more affordable over the full term.

    However, if your family member needs access to their savings – which they may not be able to do until your outstanding loan has gone down to 75% to 80% of the original property price – your mortgage debt goes back up again.

    Compare other types of mortgage

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    Last updated: 10 August, 2020