Credit Score Basics > What does it mean to be a guarantor for a mortgage?

What does it mean to be a guarantor for a mortgage?

Wollit Team2 minute read · Updated 2nd July 2024

In the UK, a guarantor mortgage is a kind of mortgage where someone else, usually a family member or close friend, agrees to cover the mortgage repayments if the borrower is unable to do so.

This arrangement is meant to help people who may not qualify for a mortgage on their own because of low income, bad credit history, or limited savings.

However, being a guarantor can have serious implications and should not be taken lightly.

What is a guarantor mortgage?

A guarantor mortgage is a mortgage where the borrower has a guarantor who agrees to cover the mortgage repayments if the borrower defaults.

This means that the guarantor is legally responsible for ensuring the mortgage payments are made, and if the borrower cannot make the payments, the guarantor will be legally required to do so.

Who can be a guarantor?

In the UK, a guarantor for a mortgage is most of the time a close family member, such as a parent, or someone with a long-term close relationship with the borrower.

The guarantor must also be a UK resident with a full right to live and work in the UK, and with a permanent address here. They must also not reach their 75th birthday before the end of the mortgage term.

Most importantly, a guarantor must have their income paid in sterling into a UK bank account and must have a good credit score.

What are the pros and cons of guarantor mortgages?

Guarantor mortgages can be great for people who struggle to qualify for a mortgage on their own. They can help those with low incomes, bad credit history, or limited savings to access a mortgage.

On top of this, guarantor mortgages can allow borrowers to borrow up to 100% of the property value, as the guarantor's home or savings serves as collateral.

However, while guarantor mortgages can be helpful, there are significant risks involved.

If the guarantor is unable to cover the mortgage repayments, their savings and potentially even their property are at risk.

This means that the guarantor could lose a significant portion of their savings or even their home if the borrower defaults on the mortgage.

On top of this, the guarantor mortgage will show on the guarantor credit report as well. If the borrower defaults, this can put the guarantor’s credit score at serious risk.

This is why, if you’re a borrower, you should work on improving your credit score so you don’t need to put a friend or family member in this situation.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies. This helps you build your credit history and directly impacts your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders that you pay your bills on time, helping you make the most of your rent while you get ready to become a homeowner.

More importantly, having a better credit score can help you get a home through your own means and without having to put your relationships at risk.