A guarantor mortgage – helping your children onto the property ladder

How to get a guarantor mortgage is a conundrum many parents are met with today. “It’s not the same as it was for you, for me”, complain self-entitled generation Y. Yet, although we hate to say it the twenty-somethings of today have been labelled generation rent for a reason. And that reason is spiralling prices of UK property – most specifically the metropolises they tend to gravitate towards.

And because of that, the question on many parents’ minds is how to get a guarantor mortgage for their children… to get them on the property ladder.

The truth of today is that in recent years many new buyers have had to rely on parental assistance to buy their first home. They’re either burning money on rent and paying somebody else’s mortgage or wistfully counting down the days until they can buy one of their own… hopefully. And this state of affairs has led many parents coming to our doors at Enness and asking how to get a guarantor mortgage.

Whilst many of our clients are able to help their children it does raise a long-term question of commitment, potentially putting yourself up for more risk or having to allot funds for a deposit. The good news when it comes to getting a guarantor mortgage for your children is that many lenders are now looking at ways to help.

The average sum being loaned or given to help adult children to buy their first home is now c. £20,000 and nearly one in twenty parents have now re-mortgaged their home to provide this.

Historically ‘the Guarantor Mortgage’ as a term has long been misunderstood as a concept and, until recently, was just another term for a joint mortgage. That meant a parent acting as a guarantor for a child would be treated as if they were a couple buying together – the parental income would have to be able to cover the new mortgage in total plus any existing mortgages they might have.

This solution is fairly commonplace but it is not always ideal as the parent is liable for the whole loan. This may prove restrictive. Parents are able to remove themselves from the loan when the child can prove to the lender that their own income could sustain the mortgage.

However, this route does not always help families who need to know how to get a guarantor mortgage. Enness have some alternative options and access to some very interesting schemes that look like they have longevity and offer an alternative. One high street lender has launched a “Lend to Hand” mortgage, in which a parent can put up to 20% of the property amount on deposit with the bank.

For those clients who are seeking a high net worth guarantor mortgage, many private banks are happy to take an old-fashioned “blank sheet of paper underwriting approach” as they will, in all likelihood, want to acquire your “family business” overall and hope to draw your young professional children into lifelong clients.

There are numerous options on the high street as well – including getting a guarantor mortgage in joint names but the deed in the child’s name (if they are on a marked career path). Family building societies also offer some interesting solutions which allow you to place a second charge on the family property; essentially giving you 100% funding for the child. There are also some other quirky solutions which can be constructed by us at Enness.

As is the case of all families who have amassed wealth in different properties and liquid assets, there are multiple ways to construct any sort of financial leveraging. This is also absolutely the case when it comes to securing a guarantor mortgage. You may be able to help in numerous ways – such as gifts, loans or guarantees.

So, a guarantor mortgage may be the solution to help your children climb onto the first rung. And investment in the stability of bricks and mortar may be a sustainable option for you – call Enness to discuss your options if you want to a guarantor mortgage at your earliest convenience.