A guarantor mortgage is a home loan where a parent or close family member takes on some of the risk of the mortgage by acting as a guarantor. This usually involves them offering their home or savings as security against the loan, and agreeing to cover the mortgage payments if the homeowner defaults (misses a payment).
On the plus side you might be more likely to get a mortgage, be able to borrow more or qualify for a lower interest rate. The main downside is that the guarantor could be liable for any shortfall if your property has to be repossessed and sold.
Many lenders will require the guarantor for your mortgage to be a close family member – usually a parent. Your guarantor will need to have:
If you don’t miss your repayments, your guarantor never has to do anything.
The best way to minimise this risk is to remortgage as soon as you can to a deal which doesn’t require a guarantor. This will be possible as soon as you’ve built up enough equity in your property (by paying down your mortgage plus any growth in its value), although it may be worth waiting until you’re out of the fixed-rate period if applicable to avoid early repayment charges.