Guaranteed Mortgages

In order to receive a mortgage, you will need a good credit score and a decent, provable monthly income. However, this is not always a possibility. Perhaps your credit score is low, or perhaps your monthly income varies and cannot be proven. Maybe you are finding it difficult to get a loan because you are over 60. Yet, in spite of these problems, you feel you can afford a loan. One option you can consider if you are in this situation is shopping for guaranteed mortgages.

What Are Guaranteed Mortgages?

Guaranteed mortgages are mortgages where someone else, such as a relative or trusted friend, guarantees your mortgage. In other words, this individual states that he or she will pay back the loan if you do not do so. The person who takes this position is called a guarantor.

As the guarantor, the person you have chosen will take over your monthly payments if you should default on the loan. This protects the lender from the problems they see in your financial history, and often results in loan approval. However, your friend or family member should carefully consider whether or not to become a guarantor. Doing so is a financial responsibility that your trusted individual may end up living with for a long period of time. Once the guarantor signs the mortgage document, he or she must be willing to step in and make your monthly payments for you if needed, no matter what the reason for your lack of ability to make the payment.

Choosing a Guarantor

Lenders will not accept just anyone as a guarantor for guaranteed mortgages. The individual you choose must have enough income that he or she can pay your loan and all of his or her current debts. Also, the lender will likely look at the potential guarantor’s credit rating, as this is a good indication of the individual’s financial responsibility. The lender wants to know for sure that the money will be repaid, no matter who is doing the repaying.

When you ask someone to become a guarantor, remember that you are asking that person to make a significant financial commitment. Do not ask this of someone if you are at all hesitant about your ability to pay the loan. Buying a home is a great endeavour, but it is not worth losing the trust of a friend or family member over guaranteed mortgages. If you did not pay back your loan and it ended up in the guarantor’s lap, you could lose that relationship.