Bad credit mortgages and Guarantors

bad credit mortgages

Bad credit? Can a Guarantor help?

Often, when speaking to bad credit mortgage applicants we are told that they have a Guarantor available to assist their application.

A Guarantor is an individual who is prepared to put themselves forward to assist a mortgage application by agreeing to become responsible for the debt if the borrower defaults on the mortgage loan. That responsibility can take the form of being responsible for some or all of the debt.

There is a lot of misunderstanding about Guarantors and their usefulness in the mortgage application process.

A mortgage lender may consider a Guarantor application where the borrower has insufficient income to afford the full mortgage payments. The lender would still expect the required support from the Guarantor to be minimal and the applicant to be able to afford the majority of the required mortgage on their own income.

The intention would be that as the borrower’s income increased in the coming years the Guarantors assistance would no longer be required.

A Guarantor is of no value supporting a mortgage where the issue is one of bad credit history. The lender will consider that a borrower with a history of not making credit payments in full and on time is likely to continue to demonstrate that behaviour whether or not the Guarantor is in place.

If you have a close relative who wants to support your mortgage application and is prepared to act as a Guarantor, the most valuable and practical help they could provide if you have a bad credit history would be to assist you with your deposit size.

A larger deposit is the most effective way to increase the chances of obtaining a mortgage if you have a bad credit history.

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