Being a guarantor for son's mortgage - what's involved? I there another way?

elljay

Dear all,

My son and daughter in law have owned their house for a couple of years having had a fixed deal on the interest rate. Now, like lots of others, 2 years on they are facing a huge hike in repayments as the deal comes to an end, and have been looking for alternatives. Their house is up for sale as he has been offered a nice job in a different area which has a house with it so in effect they will be paying a reasonably low rent. They had hoped that their house would've sold by now but with the current economic climate etc etc it hasn't happened although they have an offer on it which they are more than happy with, but the other couple need to sell theirs first. So as it is they're going to need to pay this higher rate for a while until it sells. They've spoken to a broker who has tried to get them a lower rate but as they have a chequered credit history (they ran a business for a short while which was not a great success so accrued some debts and a ccj, since repaid) the broker can't help them. Once in the rented house they thought they might then get a smaller mortgage, say around 60k and buy a little house to let out just as insurance.

I was wondering if they might get a better rate if I offered to be a guarantor, does anyone knows what info about myself I need to give? I don't own a house but have a good income so can well afford to pay their mortgage if they default (though I'd probably have to kill them if they did that!!!) - however it's a risk I could take. I don't have any debts or credit history problems.

Can anyone advise of any options for them and how I might help them? Would being a guarantor help get them a lower rate.

Thanks so much. Liz

chesky369

How old are your son and his partner? To be honest, their plight is not by any means too terrible (as yet), since they've received an offer for their house and are now in that dreadful period well known to all buyers and sellers of houses. Probably all that will happen is that it will take a few months to get sorted out before they can move on. I wouldn't rush to act as guarantor for my children, unless there was absolutely no other way out of a dire predicament and they might end up on the streets, which doesn't sound the case here.

missile

If they are waiting for a few months then there seems little point in arranging a mortgage with a new lender. They will incur valuation, set up fees and of course the friendly mortgage broker will need his cut.

Why don't they simply pay the higher variable rate the existing mortgage provider.

As and when they decide to buy another property would be the time to arrange a new mortgage.

Edinburghlass_2

Also bare in mind that a buy to let mortgage will cost more.

mummyyummy_2

I cannot help at all but i think the question elljay was asking was simply ' what are the steps she would have to take/info she would have to give/criteria she would have to meet to become a guarantor' not if other people would or would not do it for their children. can anyone in the know maybe even perphaps post a link with these answers? xmyx

Edinburghlass_2

There is no one link that anyone can give as each lender has their own criteria as to what they require and as missile says the costs of a remortgage could well negate any savings if this is fairly short term.

The OP could go and see a whole of market mortgage broker herself and see what they suggest given her personal financial circumstances.

elljay

Many thanks to all. They are going back to the mortgage advisor to find out if it makes any difference to their application. While that's the obvious thing to do I had hoped to find out more about what my involvement would be but as Edinburghlass says, it obviously differs with each lender.

Their problem is that even a few months of paying nearly £200 more a month could clobber them financially to the point where they might just hand the keys back and forget the whole thing. If they can sell soon (and who knows at the moment) they will move into the rented house and in a little while buy something for £100k or less as a fall-back just in case the job ended or they decided to move on. As they need to move for the job quite soon they wouldn't be able to afford the new rent, however subsidised, the current mortgage, plus another £200 on top of that. Their house has been for sale for a few months now but no luck with selling despite dropping the price.

Thanks for the ideas (and special thanks to my!!)

Edinburghlass_2

No lender really wants to be presented with a set of keys and them having to sell the house, if they think it might get to that stage they would be better speaking to the lender themselves, not a broker, and see if they can come to some arrangement until such times as the house sells.

chesky369

I don't think they're in any position to make long-term plans yet, such as for purchasing a buy-to-let property. Their best bet is to take matters one step at a time before they launch - even mentally - on such an idea. As Edinburghlass has said, they really must discuss things with their current lender who may be prepared to let them pay on an interest-only basis for a short period of time. Also, even if theire broker DOES manage to find them a lower rate (which is a bit hopeful), there will still be an up-front fee of at least £500. In the long term this isn't a huge amount but they're not in for the long term are they? They basically only need a glorified bridging loan.