Pros and cons to using a guarantor loan to purchase your house
A guarantor loan can help you purchase your home or get funded to borrow more, even if you have no down payment or poor credit history. If you're having trouble securing a traditional mortgage, you may want to consider a guarantor loan. However, there are benefits and disadvantages to this type of loan. Let's take a look at the pros and cons.
What is a guarantor mortgage?
A guarantor loan is when a family member or friend signs for your mortgage. Although the guarantor does not own the property, if you go into default on your loan, it becomes their responsibility to pay it. Guarantors are typically family members with a good credit history that already own their homes.
Benefits of a guarantor loan
You don't need as large of a down payment. You may have the ability to make your monthly mortgage payments, but if you haven't saved more than 10% of the total purchase price, you may have trouble securing funding on your own. You can get funded even with a poor credit rating or no credit rating. Perhaps you've had some financial difficulty in the past, and you're having trouble securing a loan on your own. Or you may be a new borrower with very little credit history. A guarantor can help you get accepted for a loan that you may otherwise be unable to get. Your income is too low to qualify for the loan. Yes, a guarantor may be able to secure a loan for you, but be careful with this. Be sure you can make your monthly payments. If you make all of your payments, your guarantor will never have to do a thing.
Disadvantages of a guarantor loan
If you can no longer make payments, your guarantor will be responsible for them. If your lender has to repossess your home, your guarantor will be held responsible for paying the shortfall if your property is sold for less than you own. It may affect your relationship. If you ask a family member or close friend to be a guarantor on your loan, and then you run into financial hardship and have trouble making your monthly payments, you will risk putting a strain on your relationship. It doesn't guarantee you will get a low-interest rate. Guarantor loans aren't necessarily the cheapest loans, you still need to shop around and find the best rate.
Consult the experts at NowLoan
Buying a home can be a lot of stress. Before you decide you want to try a guarantor loan, you may want to give traditional mortgages a chance. At NowLoan, we can help you find the best lenders to fit your circumstances. We match you up with over 40 lenders to find the best rate for you. And it's all conveniently done online. You can get a quick quote using this form. You'll see which lenders accepted your application and get quotes on the rates. From there, it's up to you to decide if you'd like to take out a loan. It doesn't affect your credit score to check your rates. Give it a try today.