What is a guarantor mortgage?

A guarantor mortgage is a type of mortgage where a family member (occasionally a close friend) agrees to provide additional security to the lender, helping a buyer qualify for a mortgage they might not get on their own — typically because their income is too low relative to the amount they need to borrow, or because they have little or no deposit. The guarantor doesn't own the property; instead, they take on legal responsibility for some or all of the mortgage payments if the borrower cannot make them.

Main types of guarantor mortgage

Income-backed guarantor mortgages

Here, the guarantor's income is taken into account by the lender when assessing affordability, effectively topping up the borrower's own income to support a larger loan. The guarantor usually signs a legal agreement making them liable for the mortgage debt if the borrower defaults, sometimes for the full loan or sometimes up to a set limit.

Savings-backed guarantor mortgages (family offset or family deposit accounts)

Rather than relying on income, the family member deposits a lump sum of savings with the lender, which is held as security for a set period (often three to five years) rather than being used as an actual deposit. The buyer may be able to borrow the full purchase price (a 100% mortgage) or a very high loan-to-value, without the guarantor needing to sign over their own home. If the borrower keeps up repayments, the guarantor's savings are usually returned in full, sometimes with interest, at the end of the agreed period.

Deposit-backed (secured against the guarantor's property)

In this arrangement, the guarantor offers a legal charge over their own home (or a portion of the equity in it) as security for the buyer's mortgage, rather than putting up cash. This can allow a larger loan or a lower deposit requirement, but it directly exposes the guarantor's own home to risk if the borrower defaults and the lender needs to recover the debt.

Risks to the guarantor

Being a guarantor is a significant financial and legal commitment, not a formality. Key risks include:

  • Liability for missed payments: if the borrower falls behind, the lender can pursue the guarantor for the shortfall, and in the most serious cases of a property-secured guarantee, ultimately the guarantor's own home could be at risk.
  • Reduced borrowing capacity: having signed a guarantee, or tied up savings, can affect the guarantor's own ability to borrow (for example, remortgaging or taking out a new loan), since lenders will factor in the contingent liability.
  • Long commitment periods: some arrangements tie up the guarantor's savings or liability for several years, during which their circumstances (health, income, own plans to move house) could change.
  • Family relationship strain: financial arrangements between family members can create tension, particularly if the borrower's circumstances change or repayments are missed.

When to consider a guarantor mortgage

These arrangements can suit first-time buyers with a stable income and job but insufficient savings for a deposit, or those whose income alone doesn't support the mortgage needed in an expensive area, where a family member is willing and financially able to help without necessarily gifting cash outright. It is far less suitable where the borrower's ability to keep up payments long-term is genuinely uncertain, since it exposes the guarantor to real financial risk rather than just goodwill.

Alternatives to consider

A Joint Borrower Sole Proprietor (JBSP) mortgage is a popular alternative, where a family member is added to the mortgage application (and so their income counts towards affordability) without being named on the property's title deeds — meaning they don't become a legal owner and typically avoid additional-property Stamp Duty surcharges that can apply to guarantors who own their own home elsewhere. Other alternatives include a straightforward cash gift towards the deposit (with lenders usually requiring a signed "gifted deposit" letter), Shared Ownership schemes, or simply saving for longer with the aid of a Lifetime ISA, which offers a government bonus on money saved towards a first home.

Key takeaways

  • Guarantor mortgages use a family member's income, savings or property as security to help a buyer qualify for a mortgage.
  • Main types include income-backed, savings-backed (family offset/deposit accounts), and property-secured guarantees.
  • Guarantors take on real financial risk, including liability for missed payments and reduced borrowing capacity of their own.
  • These arrangements suit buyers with a stable income but limited deposit or borrowing power, supported by a willing, financially secure guarantor.
  • Joint Borrower Sole Proprietor mortgages are a common alternative, boosting affordability without making the helper a legal co-owner.