What does being a guarantor involve?

It’s the time of year when students head off to university and college; often into their first homes away from home!

Frequently parents are asked to guarantee their adult children’s tenancy or mortgage, as this can be the only way for their child to move into a rented property, or buy their first home.

At Thomson Hayton Winkley we are frequently asked, what does this mean for – the Guarantor?

Stephen Greenwood, property Legal Executive, at THWlegal explains,

“A guarantee is a legal commitment to repay a debt if the person originally liable to pay fails to do so. By guaranteeing to pay your son or daughter’s rent or mortgage payments, you will become liable if they default.”

“If your child is the only tenant, then guaranteeing their rent payments should be quite straight forward. But consider the situation if your child is sharing accommodation with friends or fellow students. What are you letting yourself in for? You only want to guarantee your own child’s payment and not leave yourself open if the other’s default. Do not get caught out.

If your child wishes to purchase a property it may be a requirement of the mortgage lender that you as their parents stand as Guarantor. You are effectively being asked to guarantee their mortgage payments if your child does not pay the mortgage instalments, as if the mortgage was your own. Before agreeing to do so you must ensure that you can afford to meet those mortgage payments if your child doesn’t. You should also be aware that you may risk losing your own home or damaging your own credit record if payments are not maintained as mortgage companies often require that the guarantee is secured on your own property”

A guarantee is not enforceable unless it is in writing. The terms must be fair to the guarantor, particularly if the borrower and guarantor are consumers. As some guarantees can be particularly complex, it is recommended that you take legal advice before signing one.

Published 5 September 2019

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