How Much Can a Guarantor Increase Your Mortgage?

How Much Can a Guarantor Increase Your Mortgage?
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Published By Jennifer Jewell

Question: How Much Can a Guarantor Increase Your Mortgage?
Answer: A guarantor can increase your mortgage approval chances and potentially the amount you can borrow by providing additional security, but the exact increase depends on the lender’s policies and the guarantor’s financial standing.

The Guarantor’s Advantage: Understanding the Potential Increase in Mortgage Eligibility

Having a guarantor can be a valuable tool for borrowers looking to secure a mortgage or qualify for a larger loan amount. This article will explore how a guarantor can increase your mortgage eligibility and the factors that influence this potential increase. [ 1 ]

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The Power of a Guarantor: Boosting Loan Approval Chances

Overcoming Challenges:

Qualifying for a mortgage can sometimes be challenging, especially for first-time homebuyers or those with limited credit history or a lower down payment. A guarantor can significantly improve your chances of loan approval by providing additional security for the lender.

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Strength in Numbers:

When you have a guarantor backing your loan application, the lender considers the combined financial strength of both parties. This can give them more confidence in your ability to repay the loan, even if your individual profile might not meet all their requirements on its own.

Increased Borrowing Power:

With a guarantor’s support, lenders might be more open to approving a larger mortgage amount. This allows you to potentially purchase a more expensive property or borrow enough to cover the entire purchase price without needing a down payment.

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Factors Influencing the Increase: Understanding the Lender’s Perspective

Guarantor’s Financial Strength:

The guarantor’s financial situation plays a crucial role in determining how much your mortgage eligibility might increase. A guarantor with a strong credit score, steady income, and manageable debts offers more security to the lender, potentially allowing for a larger loan amount.

Loan-to-Value Ratio (LTV):

The loan-to-value ratio (LTV) compares the amount you borrow to the value of the property you are purchasing. Lenders typically have LTV limits, and a guarantor can help you reach a more favourable LTV, potentially allowing you to borrow a higher percentage of the property value.

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Down Payment:

While a guarantor can help in some cases, they don’t always eliminate the need for a down payment. However, their presence might allow you to make a smaller down payment than you would need to qualify on your own.

It’s important to note:

Lenders have their own criteria for assessing mortgage applications and the impact of a guarantor. Always consult with a mortgage professional to understand how much your eligibility might increase in your specific situation.

Beyond Increased Amounts: Additional Benefits of a Guarantor

There are some additional benefits to consider when exploring the role of a guarantor in your mortgage application:

  • Improved Interest Rates:

    In some cases, having a guarantor can lead to a more favourable interest rate on your mortgage. This is because the lender perceives the loan as less risky.
  • Building Credit History:

    If you have a limited credit history, a successful mortgage term with a guarantor can help you establish a positive track record of managing debt.

There are also potential risks associated with involving a guarantor. These include straining your relationship with the guarantor if you default on the loan and potentially impacting their own credit score.

Open Communication is Key: Ensuring a Smooth Process

When considering a guarantor for your mortgage, clear communication is essential:

  • Discuss with Potential Guarantor:

    Have an open and honest conversation with the person you are considering as a guarantor. Explain your financial situation and the potential implications for them.
  • Review the Agreement:

    Before anyone signs, ensure both you and the guarantor understand the terms of the mortgage agreement and the guarantor’s specific obligations.
  • Transparency with Lender:

    Inform the mortgage lender upfront about your intention to involve a guarantor in your application process.

By maintaining open communication throughout the process, you can ensure a smoother experience for everyone involved.

Seeking Professional Advice: Making Informed Decisions

The decision to involve a guarantor in your mortgage application is not one to take lightly. Here’s why seeking professional advice can be beneficial:

  • Understanding Your Options:

    A mortgage broker or financial advisor can help you explore different mortgage options and determine if a guarantor is the best solution for your situation.
  • Assessing Eligibility Increase:

    They can use their expertise to estimate how much your mortgage eligibility might increase with a guarantor’s support.
  • Navigating the Process:

    Professional guidance can ensure you understand the legal and financial implications and navigate the mortgage application process effectively.

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The Guarantor’s Impact: A Strategic Advantage

A guarantor can be a valuable tool for securing a mortgage or increasing your borrowing power. It’s important to understand the factors influencing this potential increase and the importance of responsible communication. By carefully considering all aspects, seeking professional advice when needed, and prioritizing open discussions with all parties involved, you can leverage the benefits of a guarantor and achieve your homeownership goals. A successful mortgage journey requires careful planning and informed decisions. Taking these steps can ensure a smoother process and a brighter future in your new home.



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