Guarantor Mortgages:
How to Maximise Your Borrowing Power

What is a guarantor mortgage?

A guarantor mortgage can help borrowers purchase a home even if they have no deposit or if their financial situation might normally deter a lender. For example, if you've had reduced savings after a long trip or faced other financial challenges, this type of mortgage might be an option. A family member typically acts as a guarantor, stepping in to cover payments if the borrower is unable to.

The role of the guarantor

A guarantor takes partial responsibility for the mortgage, meaning they may be required to make payments if the borrower cannot. To do this, the guarantor must either secure the loan against a property they own or place a sum of money in a savings account with the lender.

There are two main types of guarantors:

1. Whole loan guarantor: Most common, this type covers the entire mortgage. For instance, if a borrower needs a £140k mortgage but can only afford £110k, the guarantor must prove they can cover the full £140k.

2. Shortfall guarantor: Rarer, this option covers the gap between what the borrower can afford and the total mortgage. For example, if the borrower can afford £110k out of a £140k mortgage, the guarantor only needs to cover the £30k shortfall.

A guarantor can secure the loan either by:

• Property: The guarantor offers their own property as collateral, which could be repossessed if the borrower defaults.

• Savings: The guarantor places a lump sum in a lender-held savings account, which accrues interest but cannot be accessed until a portion of the mortgage is repaid (typically 3-5 years).

Can you get a bigger mortgage with a guarantor?

Yes, having a guarantor can increase the amount you’re able to borrow. If you have a low income, or none at all, a guarantor mortgage could allow you to borrow more than you could on your own, as the lender will assess your guarantor’s income as part of the application.

Many lenders cap borrowing at 4.5 times the guarantor’s income, though some may go higher - even up to 6 times!, depending on the overall financial circumstances.

Guarantor Mortgage Calculator

To get a rough estimate of your maximum borrowing, use an online guarantor mortgage calculator, which typically multiplies your income by the standard salary multiples used by UK lenders.

How a broker can help with a guarantor mortgage

Navigating a guarantor mortgage can be complex, especially if you’re on a low income. A broker with expertise in guarantor mortgages can help assess your finances, suggest ways to improve your application, and find the best lender for your situation. A broker’s market knowledge will help you secure the most competitive deal.

At Mortgage One, we work with specialists who can guide you through this process. Contact us for a free consultation with an experienced broker.

Can you get a 95% or 100% mortgage with a guarantor?

Yes, it’s possible to get a 95% mortgage with a guarantor and occasionally 100%. Although less common today, some lenders still offer 100% if the borrower has a guarantor. This typically involves securing the loan against the guarantor’s property or using their savings as collateral.

There are two main options:

1. Family deposit mortgage: The guarantor places savings into an account with the lender, which is held as security.

2. Family offset mortgage: The guarantor’s savings are used to offset the mortgage balance, either reducing the loan term or lowering monthly payments.

Speak to a broker to understand the best options available.

Other ways to stretch your maximum borrowing

If you don’t have a guarantor or prefer not to use one, there are other ways to increase your borrowing limit:

• Pay down existing debts to improve your financial standing.

• Ask for a pay rise if you’re in a secure job.

• Offer a larger deposit. If a family member can help with a lump sum, consider a gifted deposit.