Many banks require a guarantor when granting a loan to buy a home, but there are also landlords who request a guarantor for new leases. In this article, we will present what the guarantor needs to know about this standard procedure on the real estate market, which also has its risks.
My son asked me to be a guarantor for his mortgage. Can I be a guarantor? But what is a guarantor?
The guarantor is the person who provides personal guarantees, through their assets, for the payment of the debts of a debtor in the form of a bond. The obligation is a special and personal guarantee of compliance with the contract.
Any citizen can be a guarantor, as long as it is accepted as such, in this case, by the bank where the mortgage was requested to buy the house. The guarantor is found in mortgage contracts for the purchase of housing, but also in rental contracts the presence of a guarantor may be requested.
The acceptance criteria as a guarantor are very diverse and even subjective. There are banks that prefer it to own relevant real estate, while other financial institutions may find it more important to have a guarantor as a person who, despite not owning many properties, has a high salary.
Get informed and reflect before you agree to be a guarantor! By making a commitment to support someone, you make a commitment to pay the debt if the debtor does not. That is, the obligation is the contract by which the guarantor agrees to pay the debt of another person, the “original” debtor, if the person does not.
Therefore, acceptance to be a guarantor must be a calculated and well-balanced decision about the obligations assumed. If things “go wrong” and your child is forced to face an unforeseen event, such as unemployment or a pay cut, you will need to take on the role of mortgage payer. By accepting this liability, your assets have been offered as security for the debt of a third party and may be enforced in the event of default, by the debtor. Click here and get professional advice from mortgage brokers.
Can I stop being a guarantor?
Many guarantors want to waive this status, as a rule, the guarantor can only be relieved of this situation if the creditor and the debtor agree, but it is unlikely that the creditor will accept the reduction of guarantees.
The end of these cases is almost always dramatic, leaving the payment of debts to the guarantor, who can then demand payment from the debtor. But in practice, if the debtor has failed to pay the creditor’s debt, it will be very difficult for the creditor to pay it to the guarantor unless their financial situation undergoes a significant positive change.