Guarantor Mortgage

a1234555

Me and my partner are hoping to extend the amount we can borrow with my parents as guarantors. We understand that there are 2 types of guarantor mortgages; 1) where the guarantor locks away a lump sum that becomes unlocked once a % of the mortgage is paid, and 2) where the guarantor puts their property down instead. In our case we wish to opt for the second option only. However, a mortgage adviser (or a junior triage person) recently mentioned that with the guarantor mortgage we wouldn't be able to use any of our savings as deposit as the guarantor's property would be classed as the deposit and we wouldn't be able to add to it. In our case we were told that we would likely be able to borrow more with our savings as deposit due to the amount we have saved. Is this correct as it sounds like perhaps the person on the phone was incorrect (or maybe they don't offer this themselves)? I thought that we would be able to use our savings for deposit on top of the guarantor's property and that having a guarantor who is willing to put down property would increase the amount we could borrow. 

K_S

@a1234555 It's not clear to me what you're trying to achieve here with a 'guarantor'. If you don't mind me asking, is it that you don't have a sufficient deposit or is it that you don't have sufficient income?

The collateral charge (on your parents' house) option that you seem to prefer may help you get a mortgage with little/no deposit but is unlikely to supplement an income shortfall. I hope that makes sense.

a1234555

We have a sufficient income and deposit; however, we cannot secure a large enough mortgage amount (i.e. lenders do not seem to lend out much at the moment). We were hoping to be able to borrow a larger amount with a guarantor mortgage as we can afford to pay the monthly payments for a much larger mortgage than what is being offered. For instance, lets say we have 100k saved and wish to borrow 400+k but the banks are only offering 300k; we hope that with a guarantor mortgage (using parents' property option) we could borrow 400k+.

PS: We've looked at MSE mortgage best buys and can comfortably afford to pay the monthly payments for 400k+ mortgages even when the introductory rates end. 

K_S

@a1234555 Ok, so (as per lender loan-to-income multiples and affordability calculations) you don't have sufficient income to borrow as much as you'd like to.

If the banks are offering only (say) 4.5-5x your income as max borrowing, a collateral charge 'guarantor' mortgage of the kind you talk about above will be unlikely to boost the amount you can borrow. Those kind of mortgages are usually designed to act in place of a deposit so borrowers can borrow 95-100% of the purchase price.

As I understand it, you need a product that will take into account a third-party income to boost the max borrowing. Does that make sense?

a1234555

Ah that's a shame that it won't boost the amount we can borrow. Are you suggesting there is another way of boosting this?

K_S

@a1234555 If you Google joint-borrower-sole-propreiter mortgages, that's the kind of product that will help boost income for the purpose of increasing your max borrowing.

a1234555

Many thanks, this was very eye opening. I've read somewhere that these  =joint-borrower-sole-propreiter mortgages can be done with someone up to the age of 80 years old. Is this still the case today and would my relative who is 74 be able to apply with us? He does have his pension as his income and owns his property outright.

K_S

@a1234555 There still are a decent number of JBSP products in the market but the criteria varies a lot. The '80 years' you mention probably refers to maximum age at end of term so if the relative is already 74 the numbers are unlikely to stack up to use their income.

[Deleted User]

If the older person is already retired its a bit easier.  Ive done one with the eldest going to 94 purely on retirement income for them