Family-Backed Mortgage Options When Your Deposit or Income Falls Short
Plenty of people can afford monthly mortgage payments yet still get turned down. Sometimes the deposit is not there. Sometimes a lender’s income multiple caps the loan below the price of anything worth buying. A guarantor mortgage brings in a family member, usually a parent, whose income, savings or property gives the lender enough extra comfort to say yes.
This guide covers how the different structures work, who can act as a guarantor, what they are signing up to, and how they eventually step away from the arrangement.
What Is a Guarantor Mortgage?
Put simply, a guarantor mortgage is a home loan backed by a second person whose name never appears on the deeds. If the buyer falls behind, the lender can turn to the guarantor for the shortfall.
Several quite different products sit under that label today. Older-style deals, where a parent simply signed a guarantee and nothing more, have become hard to find. Most lenders now use one of four structures instead. Which suits you comes down to what is actually blocking the application: a deposit that is too small, an income that is too low, or a mix of the two.
How the Main Types Work
Joint Borrower Sole Proprietor (JBSP)
On a JBSP mortgage, a family member joins the mortgage application and their income is counted alongside yours. They become jointly liable for the debt, but only you go on the title deeds. Because the lender is looking at two incomes, the amount you can borrow often rises considerably. This has largely replaced the traditional income guarantor and is now the most common way parents help with affordability. We cover it in full in a separate guide.
Savings as Security
Here the guarantor places a lump sum, typically 10% to 20% of the purchase price, in a savings account held with the lender. The money stays locked away for a fixed period, often three to five years. Because it stands in for a deposit, the buyer can borrow up to 100% of the price. Keep the payments up to date and the savings come back at the end of the term, normally having earned some interest along the way. Fall into serious arrears and the lender can draw on that account.
Property as Security
Instead of cash, a parent can offer equity in their own home. The lender places a legal charge over part of the guarantor’s property, covering the portion of the loan above a normal loan-to-value limit. No money changes hands up front. Even so, the parent’s home stays exposed for as long as that charge remains registered.
Family Offset
A family member deposits savings in an account linked to your mortgage. Their balance earns nothing itself, but it cuts the interest charged on your loan. The savings remain theirs, although access is usually restricted while the arrangement runs.
Who Can Be a Guarantor?
Most lenders want a close relative. Parents are the usual choice, with grandparents, step-parents and sometimes siblings also accepted. A small number of lenders will consider a close family friend, but that is the exception.
Beyond the relationship, a lender is assessing whether the guarantor could genuinely cover the loan if it came to it. Expect the same income, credit and outgoings checks any mortgage applicant would face. For any structure secured on a property, the guarantor will need to own a home with enough equity, and most lenders also want them to be resident in the UK.
Age is often the deciding factor. On a JBSP mortgage the lender may limit the term so it ends before the older applicant reaches a set age, commonly somewhere between 70 and 80. Where exactly the cut-off falls varies from lender to lender, and also turns on whether the guarantor will still be working. That can shorten the term and push up the monthly payment, so it pays to model this before choosing a structure.
Every guarantor should take independent legal advice before signing. Many lenders insist on a solicitor’s certificate confirming the guarantor has had the risks explained to them.
What the Guarantor Is Taking On
Agreeing to guarantee a mortgage is a serious financial commitment, and families sometimes treat it too lightly.
If the borrower stops paying, the lender can pursue the guarantor for the arrears and, in the worst case, the outstanding balance. With savings as security, part or all of the linked account could be lost. With property as security, the guarantor’s own home could ultimately be at risk.
There are quieter effects too. Lenders will count the guarantee when the guarantor applies for credit themselves, which can reduce how much they could borrow for their own remortgage or a later purchase. On a JBSP mortgage the debt appears on their credit file as a joint liability.
Plenty of families use these arrangements successfully, so the risks are no reason to rule one out. Talk openly beforehand about what happens if circumstances change, and consider putting the answer in writing between you.
A Worked Example
A teacher in her late twenties earns £42,000 and has found a two-bedroom flat for £185,000. At 4.5 times her salary, a lender could advance up to £189,000, so income is not her problem. The deposit is. She has almost nothing saved after years of renting.
Her parents agree to place £18,500, which is 10% of the purchase price, into a linked savings account for five years. With that security in place, she can borrow the full £185,000 on a 100% mortgage. Provided every payment is made on time, her parents get the £18,500 back at the end of the five years with interest. She owns the flat outright in her own name from day one.
This is a composite example to show how the structure works, not a specific client case. Rates, account terms and maximum loan sizes vary between lenders.
Getting the Guarantor Released
Most families do not want the arrangement to run for the full mortgage term, and in practice it rarely has to.
With savings as security, release is automatic once the fixed period ends, as long as the account has not been called on. For property-backed and income-based structures, the usual route is a remortgage. Once your income has grown enough to support the loan on its own, or the loan-to-value has fallen far enough through repayments and rising prices, you can apply to refinance in your sole name and take the guarantor off. Some lenders will also consider releasing them part-way through a deal if the LTV drops below a set level, commonly around 75% to 80%.
It helps to plan for this from the start. If you know roughly when you expect to be able to stand alone, choosing a fixed rate that ends around the same time makes the switch cleaner and avoids early repayment charges.
Stamp Duty and Ownership
One of the reasons JBSP has become so popular is stamp duty. Because the parent is not on the title deeds, the purchase is treated as yours alone. If you are a first-time buyer, you can still claim first-time buyer relief, and the parent’s own home does not trigger the higher rates for additional properties. Were the parent added as a legal owner instead, the 5% surcharge could apply to the whole price.
Savings-as-security and property-backed guarantees work the same way. The guarantor never owns any part of the property, so their ownership of another home does not affect your stamp duty position.
Is a Guarantor Mortgage Right for You?
A guarantor tends to make most sense when you can comfortably afford the monthly payments but something else is holding you back. Common situations include a small or missing deposit, a starting salary that is lower than it will be in a few years, or a short employment history in a new career.
It is much less effective for adverse credit. A guarantor adds security, but lenders still assess the main borrower’s track record, and recent defaults or CCJs can rule an application out regardless of who stands behind it.
Before committing, compare the alternatives. A gifted deposit can achieve a similar result with no ongoing liability for your parents, although they lose access to the money. A 95% mortgage may be within reach if you can save a 5% deposit. Shared ownership is another route where full-price borrowing is out of reach.
Why Work With UK Mortgage Broker
Guarantor and family-backed lending is a niche part of the market. Only a minority of lenders offer each structure, and their rules on age limits, which relatives qualify, how long savings are held and when a guarantor can be released all differ. We work across the whole of the market, so we can compare the options side by side for your family’s situation and tell you which lenders will genuinely consider the application before anything is submitted.
Frequently Asked Questions
Who can be a guarantor for a mortgage?
Usually a parent or another close relative such as a grandparent.
Lenders need someone with good credit and enough income or assets to cover the loan if needed, and a few will accept a close family friend.
Does a guarantor have to own their own home?
For property-backed guarantees, yes.
Savings-as-security and some JBSP mortgages do not always require it, although many lenders still prefer guarantors who are homeowners.
Can a guarantor be removed from a mortgage later?
In most cases.
Savings are released at the end of the fixed period, and other structures are normally ended by remortgaging into your sole name once your income or equity is strong enough.
Does being a guarantor affect your own borrowing?
It can.
Lenders take the guarantee into account when the guarantor applies for credit, and on a JBSP mortgage the debt shows on their credit file as a joint commitment.
Can I get a guarantor mortgage with bad credit?
Recent defaults, missed payments or CCJs are likely to cause problems even with a strong guarantor.
Minor or older issues may still be acceptable to some lenders, so get advice before you apply.
Will my parent have to pay stamp duty if they help me buy?
Not if they stay off the title deeds.
On a JBSP or other guarantor structure the property is legally yours, so first-time buyer relief can still apply and the additional-property surcharge does not.
Final Thoughts
UK Mortgage Broker is a whole-of-market broker helping clients throughout the UK and globally to secure funding on UK property. We are directly authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Call: +44 1628 969 500 Email: info@uk-mortgagebroker.co.uk
Related Pages
- Government Schemes for First-Time Buyers – The current schemes that can help you buy with a smaller deposit.
- Types of Mortgage UK – A guide to repayment methods, rate types and specialist mortgages.
- Why Mortgages Get Declined – The most common reasons lenders turn applications down and how to fix them before you apply.
- UK Mortgage Rates – Current rate ranges by loan-to-value, so you can see what a family-backed deal might cost.
- Mortgage Protection – Cover that keeps repayments going if illness or death stops your income, which protects your guarantor too.