Guarantor on a home loan - a few questions

S

sl2006

Guest
Hi,

I have a few questions about being a [SIZE=-1]garantor [/SIZE] on a house.
My brother is buying a house and my farther is going [SIZE=-1]garantor [/SIZE] on it.

1) Can my father "stop" being a [SIZE=-1]garantor [/SIZE] after a few years. For example, if my brother gets married and the house goes into his and his wifes name, can my father take his name off the [SIZE=-1]garantor [/SIZE] list. How would he do this?

2) My father is being asked to get life assurance for about 40% of the property purchase. He's been told that he can discontinue this after a few years. Is this so? After how long? Why cant my brother get life assurance for 100% of the property price? Ive not heard of this before. Also, does he have to get it from the lending bank?

Thanks
 
Re: garantor - a few questions

Guarantors are required by lenders where they are unwilling to lend to the borrower without additional security.

A guarantor cannot just decide not to be a guarantor - they have to be released by the lender. If your brother gets married and his wife goes on the title then it might be the case that the bank would release him from his guarantee. Or if they remortgaged with another lender, then the first loan would be paid off and he would no longer have any responsibility.

As regards life cover, presumably its in case he dies, your brother cannot afford to pay then the additional life cover would reduce the level of the mortgage payable by the brother to manageable levels.And father does not need to go to lender to life cover.

mf
 
Re: garantor - a few questions

1. Yes, once your brother's income is sufficient to qualify for the mortgage on his own the guarantee from your father can be released. This should be a fairly simple exercise if your father's name is not on the mortgage deeds.

2. Your brother will need 100% life cover in his name, regardless. The lender is presumably asking for 40% cover for your father as this is the amount that his income is required to cover. Once the guarantee is no longer required the cover can be cancelled. Not all lenders require guarantors to take life cover but, in any case, you are free to take the cover from any insurance company operating in Ireland.

Sarah

www.rea.ie
 
I have another question about this.. for the given scenario:

If my brother could no longer afford to repay the mortgage and the bank sold the house to make back their money and the value of sale did not cover the amount owed, would my fathers house be at risk, ie is my fathers house effectively the garuntee? or would he owe the bank a lot of cash and if he couldnt pay be declared bankrupt/bad debtor?

I know this is taking in the worst case, but it can happen, else why would the bank want a garuntor in the first place!

Thanks
 
Guarantors are required by lenders where they are unwilling to lend to the borrower without additional security.

This is about money. If the house is repossessed and sold and fails to sell for the current amount outstanding on the mortgage plus the costs incurred by the lender, then any one liable ( brother and/or father) is responsible for any outstanding debt. Any assets available to either are available to the creditor. So yes, a house ( even a family home held jointly) can be attached by way of a judgment mortgage and then sold by the lender. It may be unlikely or not but that is why guarantors should not lightly let themselves in for it.

mf
 
Hi,

Well the bank have sent on the full mortgage quotation, and Im surprised at what I see (or am I?!)

1) They have put my father as a female full-responsibility co-owner of the loan, and there is no mention of a garuntor anywhere. (go on BOI, your having a laugh)

Is this a sinister atempt by the bank to make him responsible for the full term of the loan until he is 90!. Because I could imagine that once his name is on the loan as a fully-responsible borrower, he cant take it off at all.

Is the bank correct in what its doing (except for the female bit) or should he be written in explicitly as a garuntor and not a borrower.

Also is it possible to have it written in explicitly that as a garuntor, that he can "ungaruntor" himself after X number of years?

Thanks
 
Look, Banks make mistakes, its up to your brother and your father to work out the terms first with BofI and then to check that what they are offered in writing accords with the terms they agreed verbally. It can take the lenders several attempts to get the terms of a loan offer right, its not sinister, its probably just very poor communications.

And its Guarantor.

mf
 
The terms were working out verbally with the bank, just surprised at the official quotation, this isnt a 5000 euro loan we're talking about here. I inherently dont trust banks, especially when they always make mistakes in their favour, and whats written down on paper is what matters with this lot.

BTW thanks for the spelling correction.
 
I agree, it's not sinister. Also I agree that banks usually make mistakes in their favour!! Having said that you should get back on to the bank and tell them of the mistakes on the loan offer. Loan offers are notorious for mistakes IMO.

I have no experience of going guarantor for someone. However, my sister has done this for her children. With ONE child only the bank insisted she lodge 60K into a long term deposit account. They stipulated that if this was withdrawn, the loan would be called in. She has 6M equity in her house, so I don't see why they needed to do this. However, she agreed as her son had a house in mind, in a popular area which was selling fast. He has now removed her as guarantor with no hassle.
 
Interesting, after contacting the bank this morning, they are insisting that my father goes on the loan as a co-borrower (rather than as a garuntor) as my brother would only be able to borrow half the amount on his own. (This is not what they said in the verbal agreement). They also said that he get off the borrower list after two or three years providing that my brother pays the mortgages on time as normal.

Have other people / guaruntors found that this is normal practice?

Typically, would we need to employ a solicitor as a matter of course to change the named borrowers on the loan in 2-3 years time, or is this all done by the bank internally?

I wonder should we /can we get that 2-3 year gauruntee in writing, verbal statements are more often-than-not worthless.
 
It's guarantor/guarantee.

Your father will be able to come off the mortgage as and when your brother earns enough to fit the lending criteria on his own merit; this may be next year, ten years or never so the lender can not and will not put a date in writing. And no, you wouldn't need a solicitor to take him off the mortgage.

Sarah

www.rea.ie
 
Thanks for the clarification Sarah. Thats fair enough from the banks perspective. I know that my brother would not be able to fit the 100% lending criteria for a "long" time, much longer than 2-3 years, given that he is only be able to raise 57% of the loan today. Therefore the bank cannot be correct in its indication that my father would be able to take his name off the loan in 2-3 years. Im puzzled.
 
I guess they weren't being specific about taking your father off in "2-3 years" but that that might be an appropriate time to look again at the case - income, equity, etc.

If your brother and father - and their solicitor - are happy with the terms of the mortgage then I wouldn't worry.

Sarah

www.rea.ie
 
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