Guarantor whilst negotiating mortgage

Gilbo

Many parents that have to be guarantors for their children's rents could then be impacting your own ability to have a mortgage.

I was asked to be a guarantor for my nieces at the same time as negotiating a mortgage. The mortgage company said they treated the guaranteed amount as if it was an actual outgoing, so impacted the amount I could borrow.  

So you are stuck between both the Landlord and the Mortgage company wanting complete security, but no one is looking after your interests in the process, except you.  You are basically acting as an insurance company without getting the premiums. 

The truth is that if the banks treated it like a potential bad debt, which not even 10% of borrowers defaulted on, and adjusted everyone's outgoings by 10% or outgoings for, they would easily be covered in their lendings.

The bank were nice about it, but wouldn't budge. Openrent were horrible about it and I certainly wouldn't use them. The niece's parents have loads of money, and were happy to provide securities, but because they live abroad Openrent were dismissive. I now recommend my Landlord friends don't use them.

Slithery

Gilbo said:

I was asked to be a guarantor for my nieces at the same time as negotiating a mortgage. The mortgage company said they treated the guaranteed amount as if it was an actual outgoing, so impacted the amount I could borrow.

You're guaranteeing more than the monthly rent though, you are guaranteeing all liability.

If the tenant causes tens of thousands of pounds of damage to the property and doesn't pay you're on the hook for that as well.

user1977

Resurrecting every old thread about guarantors isn't really going to help your case...

Gilbo

Slithery said:

Gilbo said:

I was asked to be a guarantor for my nieces at the same time as negotiating a mortgage. The mortgage company said they treated the guaranteed amount as if it was an actual outgoing, so impacted the amount I could borrow.

You're guaranteeing more than the monthly rent though, you are guaranteeing all liability.

If the tenant causes tens of thousands of pounds of damage to the property and doesn't pay you're on the hook for that as well.

Another reason not to do it, but the bank doesn't take that into account

Which of the cost assumptions are really to test that you can afford the mortgage under normal circumstances? The bank assumes your salary will stay the same, which is often is not a good assumption, but also assumes your family will renege on the rent and not pay you back. Thankfully for most people that is not an accurate assumption .

 

Thrugelmir

Gilbo said:

Slithery said:

Gilbo said:

I was asked to be a guarantor for my nieces at the same time as negotiating a mortgage. The mortgage company said they treated the guaranteed amount as if it was an actual outgoing, so impacted the amount I could borrow.

You're guaranteeing more than the monthly rent though, you are guaranteeing all liability.

If the tenant causes tens of thousands of pounds of damage to the property and doesn't pay you're on the hook for that as well.

but also assumes your family will renege on the rent and not pay you back. 

That's not the issue for the lender. It's your ability to fund the liability as a guarantor. 

Gilbo

Thrugelmir said:

Gilbo said:

Slithery said:

Gilbo said:

I was asked to be a guarantor for my nieces at the same time as negotiating a mortgage. The mortgage company said they treated the guaranteed amount as if it was an actual outgoing, so impacted the amount I could borrow.

You're guaranteeing more than the monthly rent though, you are guaranteeing all liability.

If the tenant causes tens of thousands of pounds of damage to the property and doesn't pay you're on the hook for that as well.

but also assumes your family will renege on the rent and not pay you back. 

That's not the issue for the lender. It's your ability to fund the liability as a guarantor. 

Exactly, so if you can prove that you have the ability to fund the liability as a guarantor, it shouldn't have to be taken out of your monthly outgoings. 

I firmly believe the banks should take a more individual view of what the true affordability and risks to that are  

Gilbo

user1977 said:

Resurrecting every old thread about guarantors isn't really going to help your case...

No, but adding a comment on to two fairly recent threads might help warn people of this pitfall, because Openrent sure didn't

Slithery

Gilbo said:

user1977 said:

Resurrecting every old thread about guarantors isn't really going to help your case...

No, but adding a comment on to two fairly recent threads might help warn people of this pitfall, because Openrent sure didn't

It's nothing to do with Openrent. It's your responsibilty to research and understand anything that someone asks you to sign...

Gilbo

Slithery said:

Gilbo said:

user1977 said:

Resurrecting every old thread about guarantors isn't really going to help your case...

No, but adding a comment on to two fairly recent threads might help warn people of this pitfall, because Openrent sure didn't

It's nothing to do with Openrent. It's your responsibilty to research and understand anything that someone asks you to sign...

Exactly, and I'm making people more aware of this to help their research and understanding, as there is absolutely nothing in the guarantee that mentions it may impact your ability to take out a mortgage. 

Surely one of the points of these forums is to point out pitfalls we fell, or almost fell into