Guarantor Mortgages

dan.copestake

Hi there,
My Fiance and I are in the market to buy our first house but we are having trouble getting the required amount from the lenders we have spoken to.
I work full time on £35000 a year but my fiance is a student nurse and so is on a bursary of £500 a month tax free. Between us we have a personal loan that equates to £400 a month but no other debts.
We are looking to buy a 3 bed detached house that comes in around £160000 and have over 10% deposit but due to my fiances bursary (which all lenders so far have just ignored) we cannot obtain the borrowing we so wish.
Is a guarantor mortgage the right way to go as my folks (who are mortgage free) have said they will act as guarantor?
My fiance qualifies as a full time nurse in Sept 2013 so we would be ok from this point. This is also the month we are getting married and obviously we'd like to be in our own home by this point.
Help please!! What do you guys suggest we do?

holly_hobby

Your parents own income will have to be sufficient to support the borrowings - as in essence if you defaulted on the mge, your parents would be legally responsible for maintaining the payments. Would you want that pressure on them at their stage in life ?

The lender will want confirmation that your parents have sought independent legal advice as to their responsibilities as a guarantor, and they will also be looking for a time frame for the discharge of the gtor (5 yrs is a typical period within which they want you to be standing on your own feed). This element does fit in with your comment that your partner qualifies as a FT nurse in Sept 2013, and its only a shortterm issue re her low income.

Is this definite ?

What happens if she fails to qualify, will she be discharged by the NHS a student nurse, and thereby out of the nursing profession with no income ?

Will she remain employed within the NHS if she does qualify ?

Will her salary at that point be sufficient to service the mge from a lenders point of view in order to release the gtors ?

The above are all qs the UWs may pose to evaluate whether the dischargement in 2013 (or within their defined time frame is a realistic expectation).

Personally, if at all possible, I would wait until she qualifies and you know what her income will be, and that you can definately afford to maintain the mge longterm - rather than involve your parents ... but in essence yes you could look for a gtor mge - you will be best speaking to a whole of market mge broker, take with you all your income figs, and details of your partners current training and fully qualified income and date of qualification.

If a guarantor lender can not be located for your case, there is the option of your parents releasing equity from their property to increase the deposit you currently have (as a gifted deposit), which may solve having to find a lender willing to accept a gtor - but open a can of worms re their liability and repayment of the new mge ....

A decent broker will find a way for you ....

Hope this helps

Holly

dan.copestake

Holly,
Thanks a lot for your insight and guidance. We will definately look into the different options available to us.
If my fiance failed her nursing degree then she will still be employed by the NHS just on a lesser salary as a HCA.
The guarantor (my Dad) would only be for 2 years maximum. We'l actually be financially sound after Jan 2014 as thats when our loan finishes and so we have £400 a month plus the difference between incomes as extra. It literally is just the inital 'getting the mortgage we want' part that seems to be the sticky bit. We are not exactly looking to buy 'tomorrow' but buy the end of april/mid may next year, we're just keeping our eyes on the market. I just wanted to get a better understanding of what options are out there for us as I would ideally like to get an AIP from the lender.
Just so I have a better understanding, does an AIP guarentee the rate given for 12 months?
Thanks for your time
Dan

holly_hobby

An AIP/DIP is a decision on your acceptable status to the borrower and will give details of your max borrowing capacity or agreeance to the initial sum sought, given the employment situ and duly assessed income - it does not relate to a product as such.

Some lenders perform a credit check for an AIP/DIP using public domain info only (so as not to leave a search footprint), however such a light search will only reveal CCJs and Bankruptcy orders, so any late payments or defaults would not be assessed - which will blow the AIP out the water when you actually submit a full status app.

So if there is any adverse such as late payments or defaults that you are aware of, you should disclose them to your broker during your iniital meeting - this will ensure they apply for an AIP based on a full credit check (which may be by the submission of a full app depending on the selected lender).

An AIP is usually ok for 3-6mths or so (the lender will advise of their own criteria), and if your situ remains unchanged (ie no adverse, missed payments on loans, loss of job/reduction in income) during that time.

A mortgage offer, which is provided following submission of a full application and underwriting, and which will also relate to the chosen deal, will remain "live" for circa 6 mths (after which status will be re-validated), if however the product is withdrawn within that time frame (and unless a reservation fee has been paid, which in essence reserves a tranch of funds at the given rate), an alternative product would need to be selected from their offered range at that time.

Hope this helps

Holly

dan.copestake

Again, thanks so much Holly. It seems I have a lot of work and research to do then. I definately would like to get an AIP in place come the start of next year as (fingers crossed) I dont see anything changing with our situation.
I shall arrange a meeting with my bank and talk to them too.
Thanks again
Dan Copestake

Yorkie1

Although it won't do any harm (unless they perform an unnecessary credit check on you, leaving a mark on your credit files), be aware that banks will not give you the best advice. They can only advise on their own products and will not be as well qualified as an independent broker.

I wouldn't bother with the bank.