When you become a mortgage guarantor you take on responsibility for someone else’s mortgage. Your role is to give the lender confidence that any money they lend will be repaid in full and on time. This means committing to cover repayments if the original borrower is unable to. Parents will often act as a gurantor for their children when taking out their first mortgage
. While this can be a really good way to help your family, if you’re considering it you need to be fully aware of what you’re signing up to before you agree to be a guarantor. Most guarantor loans
or mortgages will require you to repay the entire amount should the original borrower be unable to pay. This makes you jointly liable for the mortgage and means that the bank can and will pursue you for the debt should the main borrower fail to pay. If things worsen this could include having your own home repossessed to repay the mortgage!
Increased borrowing mortgages
Some guarantor mortgages allow the borrower to take out a bigger mortgage than normal, asking the guarantor to guarantee the additional borrowing.
For example, if the borrower needed a £150,000 mortgage to purchase a property but ordinarily would only qualify for a £100,000 mortgage, acting as a guarantor could enable them to borrow the extra cash.
With this type of guarantor mortgage you may be able to specify that you are only guaranteeing to repay the additional borrowing (£50,000 using the example above) rather than the whole mortgage.