Buckinghamshire Building Society has launched Guarantor Option Mortgages which are available on selected products from its range of home loans.
Guarantor mortgages are aimed at first-time buyers or movers who find it difficult to raise a large deposit, and don’t want to pay an extra higher lending charge.
Parents can use up to 75 per cent of the value of their own property to help their child onto the housing ladder.
How does a guarantor mortgage work?
Using one or both parents as guarantors means that the lender will take into account the value of their property to provide additional security to enable it to lend up to 100 per cent of the applicant’s property value. This removes the need for a large deposit and any higher lending charge for indemnity insurance.
Applicants will need to demonstrate they can afford the repayments in their own right, so there is no need for the lender to investigate the parent’s income. However, a valuation will need to be carried out on their property, and they must complete an application form, detailing any existing mortgage or outstanding loans.
The society will take a first charge on the applicant’s property and a charge on the parents’ property.
The guarantor must take independent legal advice and understand that they will have a liability for any shortfall on the mortgage if the applicant builds up arears and it becomes necessary for the lender to repossess the property.
Buckinghamshire might also accept parental guarantors with equity in other properties, subject to its lending criteria.
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