Don’t you have enough savings for a deposit? Do lenders who give loans like Satsuma doubt your ability to be able to repay a loan? If that is the case, then you require a guarantor loan in order to be able to purchase a home.
Guarantors normally use their own property or its equity as security to be able to guarantee a portion of the loan or the entire loan. If that is the way to go, then it means that you are going to assume responsibility for the loan in case you cannot make the repayments, or the person you have guaranteed doesn’t repay the loan, this is the process that lowers the risk to the lender.
What Are The Types Of Guarantees Which Exist?
In recent times, guarantor loans have become common due to the fact that they bring less of an upfront cost to lenders of loans like Satsuma when it comes to the deposit. They are loans which are structured in a way that, the loan secures both the property you own as a guarantor and the one being bought.
The four common types of guarantees include:
- Security Guarantee: It is a guarantee which will be ideal if you have an excellent credit history, have no deposit and you are a first time home buyer. Some lenders will cause this type of buyer an equity guarantor, will use real estate which you own as additional security for the mortgage you want to take. In case you have a loan on your property already, the bank will take a second mortgage as security.
- Security Income Guarantee: It is normally done by parents who are helping their children who are students or have insufficient income to acquire a property. The person lending will use the parents’ property as additional security and bank on the income of the parents to prove that, the loan will be affordable.
- Family Guarantee: The guarantor, in this case, is related to the borrower. Grandparents, parents, spouses, siblings, and partners are considered in this type of guarantee.
- Limited Guarantee: In this instant, the guarantor guarantees only a part of the loan. It is a guarantee which is normally used with security guarantor in order to the potential liability to go down; the one which is secured on your property as the guarantor. The guarantee can either be unlimited or limited depending on what the guarantor wants and what the lender has set as their requirements. In case you use a limited guarantee, then it means that you will be reducing the guarantor’s exposure to your mortgage
Who Qualifies To Be A Guarantor?
Different lenders have different requirements for a person who can qualify to be a guarantor. But in general terms, a guarantor needs to:
- Have equity in the property they own and at the same time, an income which is stable in order to satisfy the lender.
- Personal credit rating has to be good
- Has to be above 18 years and at the same time, below 65 years
