Guaranteed & Joint Mortgages

Both guaranteed, sometimes known as guarantor, and joint mortgages are specialised types of standard repayment or interest-only mortgage which allow you to borrow a larger amount by including one or more additional people on the mortgage agreement. These mortgages are ideally suited to those who would find obtaining a mortgage on their own difficult, such as first-time buyers and graduates.

Guaranteed Mortgage

Most lenders offer guaranteed mortgages or a 'guarantor service' on their standard mortgage package. These mortgages allow you to borrow a larger amount by assigning a 'guarantor'. A guarantor is usually a parent or family member who is able to provide the lender with a certain amount of financial security in the event that you are unable to repay your mortgage. Depending on the lender you choose, your guarantor could be required to provide security for the entire loan. However, most lenders are satisfied if they can provide a guarantee for the amount above which you would normally be able to borrow. For example: if you earn £30,000 a year, you would normally be able to borrow £105,000 since this is three and a half times your annual income. If you wish to buy a property worth £150,000, most lenders would ask your guarantor to secure the difference, that is, £45,000.

To qualify as a guarantor, the person must be able to prove that they have enough income or savings to cover the repayments if you were no longer able. The lender can ask your guarantor to take over at any time during the term of the mortgage. However, the guarantor does not need to be tied to your mortgage for its entire term; if you begin to earn enough later on, you can usually remove the guarantor from the mortgage agreement.

Joint Mortgage

Applying for a mortgage with a spouse, partner or friend is becoming more common. As with guaranteed mortgages, the mortgage lender bases their decision on how much to lend on your combined income, which means you are able to borrow a larger amount. Some lenders offer up to three and a half times your combined income, whilst others add on your partner's income to the amount you would be able to borrow alone. For example, if your annual salary is £30,000 and your partner's is £15,000, you may be able to borrow up to £157,500.

Joint mortgages are often taken out by a parent and child, to enable the child to purchase a higher value property, or to obtain a mortgage if they have previously been refused.

Consider a joint mortgage carefully; although you may be able to borrow a much larger amount, if you have a dispute with your partner, you may be faced with a large bill for legal costs. These are incurred if you wish to change the mortgage agreement, such as by removing your partner from the contract.