effect of guarantor on lending amount

tails009

Hi all,

I’m looking for advice / experience with regards obtaining a mortgage using a guarantor. I’m in Scotland if this makes a difference?

I was out of work for 2 years looking after the kids and my wife worked full time. Earlier this year I decided to go back to work and set up as a contractor through a Ltd. Company. Now we have money coming in we’ve started looking to move but since I’ve been a contractor such a short amount of time I understand that we can’t use my salary for obtaining a mortgage.

However, in laws have stated that they would be happy to be guarantors on a mortgage but what effect would this likely have on the amount a lender will be willing to lend?

Some rough figures for reference:

Income:
Salary 1 (wife) = £62k
Take home = £3,200/month

Ltd Company monthly salary / dividends / expenses (me) = £4,200/month

Therefore, joint take home is approx £7,400/month

Current Savings = £25k (increasing by £4k / month)

Current house:
Value = £220k
Outstanding mortgage = £140k (18.5years remaining)
Therefore, equity = £80k
Current Mortgage payments = £800/month

Further debts:
0% credit card = £11k total (can be cleared from savings)
= £110/month
PCP on car = £80/month

Using the current lenders website, based on salary 1 alone, we can borrow an extra £90k which would put us at a total of £310k total purchase price. However, the houses we’re looking at are tending to be closer to £400k so in theory we want to borrow an extra £90-100k.

Using the same lender:
The mortgage repayments for a £310k purchase would be approx. £1,100/month for a 5y fix.
The mortgage repayments for a £400k purchase would be approx. £1,500/month for a 5y fix.

So the difference is £400/month which is approximately 10% of what I take out of the Ltd company monthly.

So after all of that, my question is, would using a guarantor be likely to secure an extra £400 - £500 / month from a lender? Is that how it works? The inlaws own their own home and have substantial savings so I don’t think there would be any issue with using them for this?

Thanks.