House guarantor transfer

scubaking

I wonder if you can help me or point me in the right direction, a close friend has asked whether i would sign as a guarantor for their house. The current guarantor would like to remove themselves from this position. The mortage outstanding on the property is 60k. I would like to help but i'm unsure whether this is possible or what the process is. The property is currently a buy to let. I will be contacting a solicitor, but initially would like to understand the process. Also wondering what tax implications there might be, any stamp duty payable.

silvercar

If the mortgage holder doesn't pay the mortgage, the lender chases the guarantor. If the arrears get so bad that the property is repossessed, the lender sells it for what they can get. They can then chase you for any shortfall between the money owed+arrears charges+repo costs+sale costs.... If you have property of your own they could put a charge on your property for any money they have lost on the repo'd one.

Usually guarantors have to show sufficient surplus income to make up for the lack of income by the borrower.

The fact it is a BTL is interesting. The borrower can't show sufficient income of their own or enough rental income to justify the amount lent. What happens if the tenant leaves and/or the boiler needs replacing? You would need to step in or there would be no rental income.

Personally I would stay well clear. Its one thing supporting a family member or close friend to enable them to continue to live in their own home, but to support a business venture that the bank feels is not viable on their own income and rental earnings is something I would stay well clear off.

smartpicture

Agree with the above.

I would also like to be 100% clear on why the existing guarantor doesn't want to be one anymore, as they probably know more than you do.

scubaking

hi thanks for the responses, the current guarantor is a family member of the resident, but needs to move so this is limiting their future. The resident is in good employ but obviously cannot get the mortgage. Hope this helps in the detail.

Jowo_2

Never mix personal relationships with business - the risk is that you lose a friendship and a considerable sum of money to help out someone who can't seem to independently afford their lifestyle. Don't do it.

There are plenty of posts made her by guarantors for rental properties who rue the day they signed up to support a friend or relative's tenancy application and who then felt cheated and exploited after doing them a favour.

don't expose yourself to an unnecessary business risk and ignore sob stories. let them find someone else.

Jowo_2

scubaking wrote: »

hi thanks for the responses, the current guarantor is a family member of the resident, but needs to move so this is limiting their future. The resident is in good employ but obviously cannot get the mortgage. Hope this helps in the detail.

I don't quite understand why a geographical move would have a bearing - please elaborate. Surely they have other relatives?

I also don't understand a mention of it being a Buy to Let and then you say the resident can't afford the mortgage?! You've got me confused. Do they plan to live in their own buy to let property or have I misread this? Do they have another property, too?

If they can't afford something off their own back, trust the credit rating system and don't go there.

gauly

Personally, if this was their main residence and you were helping to keep a roof over their head then maybe I would consider it. But being a guarantor on a money making venture where your friend gets all the profit and you get the risk - I wouldn't do it no matter how close they were. They can sell the house, pay off the mortgage and put their money into some other form of investment like shares or anything really that doesn't need to risk your financial future.

maninthestreet

Where is the benefit for you in becoming the guarantor?

Cannon_Fodder

Why does an established business need a guarantor ?

What percentage of the profits do you get out of it ?

scubaking

Hi this is the persons main residence, that is why i'm feeling I should assist. I appreciate the comments around businesses, but this isnt that scenario, no profit. Not the best situation for the individual concerned, so looking at options, pitfalls etc. There is no personal benefit in my becoming the guarantor, but the resident keeps a home. This may though not be the best solution, perhaps a sale is best, but then i presume there are taxes applied.

silvercar

The property is currently a buy to let.

There is no personal benefit in my becoming the guarantor, but the resident keeps a home

Misunderstanding here.

Are you being asked to act as guarantor for someone who is a tenant? Or are you being asked to guarantee a mortgage for someone who owns the property?