Guarantor effect on mortgage application

Niowrtt

If I were to be guarantor for someone else's unsecured loan, what effect might that have on my ability to take out a mortgage?

kingstreet

Difficult to say. Worst case scenario is the annual cost of the loan is deducted from your income before your borrowing power is calculated.

Niowrtt

Thanks, guess I'll talk to my lender before agreeing anything.

maninthestreet

Unless you are happy paying off someone else's unsecured loan with your own money, I would avoid agreeing to be a guarantor. Who is this 'someone' - a family member of just a 'friend' ?

holly_hobby

In repect of personal loans - a guarantor is generally reqd when the applicant has a poor credit history i.e has previously defaulted on creditors and does not own their own home (for security of the OC) ..

On that basis alone I would steer clear of any such arrangement - it should also be noted that unsecured loans may become the subject of a charging order, regardless of their original basis at inception ... so beware .. !!

I would guess that from your lenders point of view, they will take the approach that you are in essence party to the loan, as if the debtor defaults, the creditor will revert to you for payment - the commitment thereafter having an impact your own affordability for mortgage purposes.

In conclusion ..... I would politely decline your friends kind invitation !!!

Hope this helps

Holly x

Evilm

It does count as debt that you have and reduces your borrowing power as if it was your own mortgage or loan. This is because you would be responsible for the payments should the borrower defaults. If they didn't take that into account then they would possible risk you defaulting on your own mortgage should you end up having to pay the guaranteed loan.