High deposit, low income on paper, but can pay double as much. Can guarantor mortgages plug the gap?

smipsy

Hi all,

I'm only starting my mortgage journey, so I am still in the "research" phase. I work for the police, and earn £27030 basic, and about another £5k extra (in overtime + mileage + unsocial hours allowance). My average take home pay (after all deductions) for the last 12 months is ~£2160. My pay always increases in July, and the next pay scale due is to £28158.

I have about £60k to use as a deposit, and I understand that at best I can get 4X my annual income as a mortgage. Unfortunately that leaves me short about £60k - £80k from my desired property range (around £250k).

My spouse is self-employed, but with minimal income due to the last two years having almost no work (it amounts to something like £1000 a year). This is due to pick up back to about £1000 a month beginning of next year, but even then it will be impossible to use it as a regular income for the purposes of the mortgages (due to it being self-employment, and the last two years were abysmal), so unfortunately there's no point in both of us applying for a mortgage, as I would get offered less mortgage, rather than more.

I have an ongoing inheritance pay-out from abroad, which is about £250 a month. This pay-out ends sometime in 2027, and I simply move this money to UK every 6 months or so, whenever the exchange rate is decent. Again, I can't use that as an income, so it's just bonus money that I know I can have, but can't really use it to extend my mortgage prospects.

I have a close friend, who is mortgage-free and with two properties, who is willing to act as a guarantor, but I've never heard of that kind of mortgages. Has anyone every done something similar, and would that be something to consider? I am currently paying £700 in rent every month, and could easily pay that much of a mortgage. My friend knows my finances, so also knows that I could easily pay £1400 a month for a mortgage, if necessary. Because of that he is happy for his financial situation to be used as a "boost" on my mortgage, but neither of us really knows how it's done. I did try to google, but most guides purely state "you have to go to the bank for this kind of a mortgage". Obviously, I would like to have a bit more information about all that before I commit.

I can easily overpay between 5% to 10% of the mortgage every year, so my friend would only need to be a guarantor for a few years, until I have enough equity in the house.

TL;DR:

I earn £27030 basic salary + ~£5k on top (this extra goes up a bit every year as well)
Secure job, cannot be made redundant
My salary goes up to £28138 in July 2022, £30411 in July 2023, £34950 in July 2024 and £41130 in July 2025.
~£60k deposit
Have about £500 of income every month from various other things that I cannot use as income for the mortgage calculations
Spotless credit history
Banks will offer me a mortgage of about £120k to £130k according to online calculators
Dream properties are around £250k, leaving me with a £60k-£80k
Financial secure friend is happy to plug that gap and acts as a "guarantor" without any claim on the property.

Any advice on whether that is possible or not?

Thanks everyone!

[Deleted User]

Yes it appears to be a reasonable solution to buying in the near future rather than waiting for spouse income to be provable.

It is not a guarantor in the traditional sense.  It is a joint mortgage with your friend being completely liable for the payment in the same way as you. 
If you mess up yout bank account for some reason and miss the mortgage direct debit then friends credit report will show a missed payment and trash their score.

Friend will be required to have independent legal advice to highlight that they take all the risk. You could literally refuse to pay the mortgage out of spite or something and friend makes rhe choice of destroying own credit rating by not paying it or covering it each month to protect their credit.  They would have no power to force youbto sell the property as they wouldn't be named as an owner.  Big risk for the guarantor.

As it has this risk, most lenders will restrict it to close family members only. Some are more flexible though.

Research 'Joint Borrower Sole Proprietor' mortgages 

steampowered

You might be able to borrow more than you think. It is actually possible to borrow up to 5x your salary. 

On a £32k salary you could borrow perhaps £160k. Add on a £60k deposit and any support you can get from your partner's earnings, and you aren't too far off a £250k property. 

I am not sure whether all lenders would give full credit for all of your overtime/mileage etc. as income. It would be worth speaking with a mortgage broker. 

If you still can't afford the property you want, personally I would wait a year or two for your partner's earnings to pick back up and then buy. I am not sure it is a good idea to ask a friend to guarantee the whole mortgage - I don't like to mix friends and money.

Also, a guarantor mortgage might be more expensive than a standard mortgage - with your £60k deposit you will have a good LTV, so standard mortgages are extremely cheap (low interest rate).

strawb_shortcake

A slight tangent but I've used Police Mutual for mortgage advice in the past and they have been excellent and no mortgage fees either.

amnblog

Getting your friend involved as a guarantor is not possible. As a co mortgagee is possible but not smart, it will end in tears.

You should either:

Tailor your expectation on property
Consider shared ownership
Consider Help to Buy