Guarantor Mortgage Bad Credit

Podcast approved by The Openwork Partnership on 24/01/2024.

Guarantor Mortgage Bad Credit

Lee McAteer explains how guarantor mortgages can work with bad credit.

What is a guarantor mortgage, and how do I know if I have bad credit?

A guarantor mortgage is where someone else beside you is legally responsible for paying the loan. So, if you’re unable to pay, they are legally required to do so.

To find out if you’ve got bad credit, just look at your credit file. You might look at Experian, Equifax or Transunion – or, to make it easy for yourself, there’s a website called Checkmyfile.com. It provides free access to your credit file across all the main credit agencies. We give no endorsement and accept no responsibility for the accuracy or content.

Can you get a mortgage with a guarantor with bad credit?

It’s definitely possible to get a guarantor mortgage if you have bad credit. A lot of lenders will take a guarantor mortgage with a poor credit rating. But if you’ve got bad credit, you don’t necessarily need a guarantor – there may be other options.

Do guarantors get credit checked and can you be a guarantor with a bad credit score?

Guarantors will get credit checked and if they have adverse credit, it’s less likely the application would be accepted. But there are still lenders that would accept a guarantor with a lower credit score.

Does being a guarantor affect your credit rating?

It shouldn’t affect your credit rating as long as the main borrower maintains the mortgage on a monthly basis, and doesn’t miss any payments.

What is the minimum credit score for a guarantor?

There’s no specific minimum. All lenders have their own score cards and assess applicants differently, so it just depends on the lender. Someone with a low score or adverse credit is obviously going to be seen as a higher risk to a lender, and less likely to be accepted.

Is it hard to get a guarantor mortgage with bad credit?

It’s always harder to get a mortgage if you’ve got bad credit, but there are still lenders that will help. It just depends on the size of the debt and when the adverse events have happened.

If they happened more recently, it will be harder to obtain the mortgage than if they happened two or three years ago. Again, it’s lender specific and time dependent.

Do mortgage lenders still accept guarantors?

Yes. There are a number of lenders including high street banks that offer guarantor mortgages. It’s best to speak to a broker so you know which would be the most suitable option for you.

How do you qualify for a guarantor mortgage with bad credit?

There are no minimum scores. It just depends on your affordability, the lender’s criteria and the overall case, really, that we’re going to put to the lenders.

How much more mortgage can I get with a guarantor if I have bad credit?

Having a guarantor can help you get a larger mortgage in some scenarios. It can also help if you have a smaller deposit or no deposit at all – as guarantors can allow you to borrow up to 100% of the property value.

This is because the guarantor’s home or savings can be used as security for the loan. It just depends on the scenario.

Does being a guarantor affect my borrowing capacity?

If you are the guarantor and you are going to obtain another loan or another mortgage, the mortgage you guarantee can be taken into account. It then could affect your borrowing capacity, because you are essentially liable for that loan if the applicant were to default or miss payments.

Is it easier to get a mortgage with a guarantor with bad credit?

You might need a guarantor if you’re on a low income or you have a bad credit history. Having a guarantor does mean you’re more likely to be accepted for a mortgage.

What are the potential risks involved in a guarantor mortgage?

If you default on the mortgage payments, the lender could repossess the home. They could also repossess the guarantor’s home or use their savings, if that’s how we’ve structured the borrowing. It just depends on what security has been used.

What are the benefits of having a guarantor if I have bad credit?

If you have a poor track record, it can help to have a guarantor. If you maintain the mortgage successfully, in the future we can release the guarantor from your mortgage. It can help you get on the property ladder, especially if you can’t get a mortgage independently.

Can I stop being a mortgage guarantor?

You can, but it’s down to the lender’s consent. As long as the applicant meets their criteria when the fixed deal or tracker deal taken out comes to an end, they can remortgage in their sole name. That’s the main way to be released – but yes, you can be released at any point subject to the lender’s consent.

Can I get a guarantor mortgage with no deposit?

You can. This is usually where a parent, relative or a close friend can help. They would use their equity from a property or savings and put that forward as the deposit. But no money is actually changing hands. Either the savings are locked away or the equity’s locked into the deal.

What happens if my guarantor can’t pay my mortgage either?

This is where the property is then at risk of repossession. The lender would look to repossess the property – whether it be yours or or the guarantor’s. It will depend on what’s been agreed at the outset. Obviously, that’s the worst case scenario.

What happens if my guarantor dies?

If the guarantor passes away, the lender may require you to find another guarantor to cover the mortgage in the event of default.

How can I improve my chances of getting a mortgage with a guarantor if I have bad credit?

Have a look at your credit file and see what is actually on it. If anything is incorrect, you can look to get that removed or updated.

It’s important to register on the electoral roll. If you have credit cards, make sure you are reducing the balance and, if you can, clear the balance in full each month. Over a period of time, your score should improve.

Have a look at your credit report with a mortgage broker, and we can put a plan in place. You might not be ready now, but in six, 12 or maybe 24 months you could be in a better position. Having something to aim for is much better than burying your head in the sand and thinking you will never be able to get a mortgage.

What else do we need to know about bad credit and guarantor mortgages?

Guarantors and bad credit can be complex and you may need help. So speak to a broker. Have a conversation – even though you might not be ready now, a broker will explain how you can get into a position to buy a property or remortgage.

There’s no charge to have a chat with us. We’ll have a look at your credit report and get something in place for you.

Approved by The Openwork Partnership on 24/01/2024.