March 15, 2013
Banks normally like guarantors to be immediate family, have no debt against the property (some will allow guarantors to keep a small debt against the home) and to take legal and financial advise saying that they understand the implications of a guarantor.
These days these types of guarantees are called "limited guarantees" where the guarantor is only liable for the amount that is the guarantee (in this case the $65,000), not the entire loan amount. So if something were to go wrong with the purchasers and they could not make payments and the bank had to step in and sell the house and they made a loss on it then the banks would then turn to the guarantor to come up with the shortfall up to the value of the $65,000 if that much was needed to pay the bank back.
Banks look strictly on guarantors and will always do a valuation on the guarantee property as well as checks on credit histories of all involved.
Guarantors will need to be aware that having a guarantee against their property will impact any future ability to borrow themselves, so guarantors should consider their future plans in addition to their willingness to provide a guarantee.
Please don’t hesitate to give me a call should you have any questions.