Guarantor loans

A guarantor loan involves a third party, the guarantor, who agrees to repay the loan if the borrower defaults. The guarantor generally provides a property as additional security for the borrower. These days, most lenders offer a limited guarantee. This means the guarantor is only liable for only part of the borrower’s mortgage.

The purpose of a Guarantor loan is to allow the borrower to avoid Lenders Mortgage Insurance. This generally means that the borrower can get into the market quicker with a lower or no deposit. Additionally, another benefit is that these loans will generally attract a better interest rate because of the additional security that the Guarantor is providing.