Guarantor question

CJ1983

Well, now I've started asking questions, I've got the hang of it a little, so here's another!

As my earlier posts said, I'm looking at getting an FTB mortgage. One possibility I considered if unsuccessful was a guarantor. My parents credit is good enough for them to act in this capacity. Their willingness might be a different matter, but we'll first tackle the possibilities before the definites!

I understand that only a small number of mortgage companies will accept a guarantor. My question is, how long does the guarantor remain bound for? It seems like it would be simple to get a parent to guarantee my mortgage payments for say 3 or 4 years, which should be plenty to demonstrate responsibility, but it seems impractical for a guarantor to be bound for 25 odd years.

Thrugelmir

CJ1983 wrote: »

but it seems impractical for a guarantor to be bound for 25 odd years.

Unlikely yes but the guarantee will remain in place as long as necessary.

The guarantor guarantees the actual mortgage repayments in the event of default. So a commitment not to be taken on lightly.

Have you looked at Lloyds Lend a Hand Scheme. A possible alternative. If your parents circumstances allow.

CJ1983

Cheers.

Strange business these mortgages. It seems very odd that a guarantor agreement isn't for a set period of time.

Brock_and_Roll

Not really....as a banker I can tell you that whatever the form of finance you are talking about, guarantees are almost always for the full life of the underlying agreement. In fact technically many extend beyond the term in case there are any comebacks (tax bills etc).

If a mortgage is for 25 years then its 300 payments of £XXX per month - and a guarantor is guaranteeing that ALL of these will be paid.

Of course the simple way to remove the guarantor after a few years is to remortgage - but obviously you cannot 100% promise to your in-laws that you will be able to do this as you dont know your financial situation or the state of the market down the line. House prices could fall significantly making it impossible to re-mortgage or you could have had a change in personal circumstances eg lost job etc.

Personally, I would never go down the guarantee route - its storing up potentially major problems in a relationship - who knows what might lie ahead over the years to come.