How does your property work as security for a mortgage?

Your property provides your lender with collateral for your mortgage.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

A secured loan is a way for people to secure a mortgage using their own or someone else’s property as security. It’s what the lender uses as protection in the event that you can’t repay the debt.

If you can’t repay your debt or fall into severe financial difficulties, the lender can take possession of the asset you secured the mortgage with and sell it to recover their costs.

It’s not unheard of for a parent to use the family home as security for a mortgage taken out by their child. In this case it would be called a family guarantor mortgage.

What is a guarantor and how do they provide security?

Guarantors are generally parents or close family members who agree to assume responsibility for a mortgage should the borrower be unable to repay it. Borrowers use guarantors to enable them to buy a home with little or no deposit. A guarantor often uses their own home as security for the borrower’s mortgage.

What happens if you don’t keep up your mortgage repayments?

If you fall behind on your mortgage repayments, eventually your mortgage lender will want you to clear them. If you don’t do this, the lender may start court action. This is known as a possession action and could lead to you losing your home.

If you have a property that is being used as security for a guarantor loan, the lender may try to take possession of that property. However, it’s not a reason to panic because a lot can be done in time before you actually lose your home.

But you must take action quickly.

  • Contact your lender. Find out who you can speak with to negotiate an arrangement with your lender.
  • What to say to your lender. When you’ve found the right contact to deal with, explain why you fell behind on your mortgage and how you’re going to deal with the problem first. Put the details in writing and come up with a plan which suits you.
  • Be aware of your rights. There are rules that say that your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off your debt, if you are able to.

The bottom line

Securing a loan against your home is taking out a “mortgage”.

Normally when we talk about mortgages, we’re referring to the “first charge” over a property. Tht’s typically a bank, and if you don’t pay the loan back, it means they’re first in line to recoup their losses through selling the house.

Sometimes people secure a second loan against their property. That’s a “second-charge mortgage”. This will typically be smaller and shorter.

Finally, sometimes parents may act as a guarantor on their child’s mortgage. This is known as a “family guarantor mortgage” and will typically mean using the family home as security in the event that the child doesn’t pay their mortgage.

In all three cases, a property is effectively being put on the line, because banks typically won’t lend more than about £25,000 without having that safety net. So securing a loan against property isn’t to be taken lightly, but it’s common in the UK. Always keep up with mortgage payments, and if you think you’re going to struggle to meet your commitments, communication with your lender is key.

Finder survey: What aspects of a mortgage matter most to Brits when choosing a one?

Response55+45-5435-4425-3416-24
Overall cost46.81%41.52%48.31%51.55%33.98%
Initial rate38.5%33.33%40.25%36.02%24.27%
I would not choose a mortgage24.93%14.04%7.2%7.45%3.88%
Flexibility22.99%28.65%26.69%32.3%29.13%
Whether there's an application fee19.67%16.96%24.58%16.77%22.33%
Provider reputation15.51%14.62%16.53%27.33%22.33%
Customer service12.19%14.62%16.53%25.47%18.45%
Don't know11.63%18.13%17.37%11.18%20.39%
Other0.83%0.58%0.62%
Source: Finder survey by Censuswide of 1032 Brits, December 2023
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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