News & Articles The Ins and Outs of Home Loan Guarantors
The Ins and Outs of Home Loan Guarantors
7 Oct 2015
For those who are first time home owners or experiencing applications for a housing loan for the first time, you may be asked by the banks or lender to obtain someone who is willing to be your guarantor. Although not all applications need a guarantor. In any case, you may start scratching your head wondering what a guarantor is and how he or she is important to your loan application process.
Here we attempt to answer some basic questions regarding guarantors:
What is a guarantor?
A guarantor is basically someone who is willing to pay back your loan for you in the case that you are unable to. The guarantor adds their property as a part of the deal to secure your loan. Of course, your own house is the primary mortgaged one, but if that is forfeited, they will pursue the property of your guarantor.
Why do I need a guarantor?
If the bank is not convinced that your income stability is up to their standard, or if your down payment is insufficient, and your mortgage financing is very high, you may be asked to provide a guarantor so that they feel more secure that the money they’re lending you can be recovered.
Who can be my guarantor?
Due to the large amount of money involved, usually guarantors are immediate family members. Some banks allow extended family like grandparents, siblings and cousins to be guarantors. Some banks even allow ex-wives and ex-husbands to be guarantors but this is very rare and depends on the lender and your financial situation.
What are the benefits of having a guarantor?
Having a guarantor is very useful for those who absolutely have no funds to pay for a down payment and want to take the full loan on their house, meaning people who want a 100% margin of finance.
Additionally, if you provide a guarantor, you will not need to pay the housing loan insurance that is usually necessary on other loans.
What will happen if I cannot pay my loan?
In the unfortunate case that you cannot pay your loan, whatever is leftover will be moved over as a debt to your guarantor through the bank taking legal action.
It is very important if you yourself are asked to be a guarantor, to first seek legal and financial counsel whether you are financially competent to take on this responsibility. You should also remember that if you do happen to take on the task of paying someone else’s loans, your own credit history and performance will be affected.
(中文版请看这里:http://www.durianproperty.com.my/blog/article/1200)
Here we attempt to answer some basic questions regarding guarantors:
What is a guarantor?
A guarantor is basically someone who is willing to pay back your loan for you in the case that you are unable to. The guarantor adds their property as a part of the deal to secure your loan. Of course, your own house is the primary mortgaged one, but if that is forfeited, they will pursue the property of your guarantor.
Why do I need a guarantor?
If the bank is not convinced that your income stability is up to their standard, or if your down payment is insufficient, and your mortgage financing is very high, you may be asked to provide a guarantor so that they feel more secure that the money they’re lending you can be recovered.
Who can be my guarantor?
Due to the large amount of money involved, usually guarantors are immediate family members. Some banks allow extended family like grandparents, siblings and cousins to be guarantors. Some banks even allow ex-wives and ex-husbands to be guarantors but this is very rare and depends on the lender and your financial situation.
What are the benefits of having a guarantor?
Having a guarantor is very useful for those who absolutely have no funds to pay for a down payment and want to take the full loan on their house, meaning people who want a 100% margin of finance.
Additionally, if you provide a guarantor, you will not need to pay the housing loan insurance that is usually necessary on other loans.
What will happen if I cannot pay my loan?
In the unfortunate case that you cannot pay your loan, whatever is leftover will be moved over as a debt to your guarantor through the bank taking legal action.
It is very important if you yourself are asked to be a guarantor, to first seek legal and financial counsel whether you are financially competent to take on this responsibility. You should also remember that if you do happen to take on the task of paying someone else’s loans, your own credit history and performance will be affected.
(中文版请看这里:http://www.durianproperty.com.my/blog/article/1200)
Source: DurianProperty.com