What it means to be a guarantor of a mortgage, explained by notaries – idealista / news

There are many mortgages in which the figure of the guarantor appears. A person who serves as a guarantee to the bank in case the debtor cannot pay the loan for the purchase of a house and who must assume the debt.

Despite the fact that the guarantee has lost weight in the market compared to the boom years, operations are still being signed in which, for example, parents guarantee a child’s mortgage.

As explained by the web portal notaries, “the bank will request that there be guarantors in a financial operation when the guarantees offered by the borrower are not sufficient. This will depend on the amount and duration of the loan and the creditworthiness of the debtor ”. And it is not the same as a couple with job stability and wealth ask for a loan of 5,000 euros to be repaid in the short term, than a young man who has just started his professional career and requests a mortgage of 100,000 euros to return in 20 or 30 years.

In every mortgage operation, the bank analyzes the applicant’s ability to pay, looking especially at his or her assets, what income they have and if they are stable. When buying a home, the first guarantee requested by the entity will be the mortgage, but sometimes it is not enough and the bank asks for more guarantees to grant the loan.

And this is where the guarantor comes in, who serves as a kind of guarantee for the bank, since he will be the in charge of assuming the amounts pending payment in case the principal debtor cannot do so.

And what is this third party obliged to do? As detailed notaries online, “in principle you are bound by the same terms as whoever has requested the loan. If it stops paying, the bank can go to the guarantor and demand the payment of any unpaid amount or even the entire loan if there is legal cause for it to expire before the term “.

This does not mean that the guarantor is going to lose money that he has had to assume, since he can claim it from the owner of the loan and he has the obligation to repay it. But nevertheless. Notaries warn, “If my son has not been able to pay the bank, see how he pays me …”.

The problem is that the guarantor, like the principal debtor, is obliged to respond to the payment that your current and future assets, although in his case the goods are not mortgaged, “so he can freely sell or buy properties, although without damaging his financial solvency”, clarifies the portal.

Another risk involved in being a guarantor is that it could involve a ballast when requesting financing, since “the famous CIRBE will appear in the risk register of the Bank of Spain, so its solvency is more limited than if the guarantee did not exist”.

Third, notaries recall that the guarantor does not disappear, even if the guarantor dies. In other words, the guarantee is transmitted to the heirs, an aspect that they recommend taking into account when accepting an inheritance.

As it summarizes Juan Villén, head of idealista / mortgages, “The guarantee is a tool that can be very useful to access financing that would not otherwise be obtained, but involves high obligations for the guarantor, so it should not be used lightly. Our recommendation is that a guarantor only be presented when he is able to meet the mortgage payment in the event of the borrower’s inability to pay, in order to avoid endangering his assets. We have seen too many cases where parents’ home is put in jeopardy by trying to help their children, so we recommend prudence in this situations.”

Now there are also different formulas to minimize risks. Although in general terms the obligation of a guarantor is for the entire loan plus its possible interests, the notaries remember that you can always negotiate with the bank the limitation of liability or agree that the guarantee disappears when the debt falls below a certain amount. In addition, if there are several guarantors, in principle all are responsible for the entire debt, although you can also negotiate what is known as “Joint responsibility”, and that assumes that each guarantor is responsible only for a part of the loan, not for the whole of it.

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