Absolutely, I wouldn't hesitate.
I wouldn't for my my SIL or one of my brothers but in your circumstance yes with the proviso that income insurance was in place along with house and contents insurance. Also whose name would the title be in consider if it would be advantageous to your name with her on the title just in case
If she has a 20% deposit she could apply for a low doc loan or no doc. Higher interest rates of course, but its the way around it
I would go guarantor for a home loan rather than lend the money yourself. But make income protection insurance and life insurance essential before hand - make sure both will cover the home loan repayments too. The advantage of going guarantor is that you just need to 'help' financially if she runs into trouble and it sounds like you don't think she will. If she borrows money from you it means if she misses a payment you need to chase her, it means that when you want to be discussing the latest movie you've both watched or holiday you have planned, you need to let her know that her last payment wasn't on time.
The other thing is that if she takes 30 years to pay it off you don't have that hanging over your head for the whole time.
My parents went guarantor for myself & my dh to get a house as we didn't have a deposit. We couldn't have bought otherwise and it was great. We've never missed payments and had paid off over 20% within a few years (thanks to increasing value rather than massive extra payments) and so once we'd done that the bank was happy to remove my parents as guarantor. The same will happen for you, you could be removed as guarantor with time as the bank is happy that your sister is paying off the loan readily. That frees up your equity to invest elsewhere.
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