Choosing the Right Guarantor is Key! How to Avoid Mortgage Loan Traps?
Understanding the Mortgage Situation of Guarantors to Protect Your Interests
When applying for a mortgage loan, choosing the right guarantor is crucial for borrowers. Today, we will discuss the risks of choosing a guarantor and provide some suggestions to help you avoid falling into mortgage loan traps.
I. Impact of the Guarantor's Mortgage Situation
When choosing a guarantor, borrowers need to consider whether the guarantor already has a mortgage loan. This is because the guarantor's mortgage situation will affect the borrower's loan-to-value ratio, debt-to-income ratio, and stress test results.
Guarantor with an existing mortgage loan
If the guarantor already has a mortgage loan, the borrower's loan-to-value ratio will decrease by 10% without the need for mortgage insurance. In addition, the debt-to-income ratio and stress test ratio will be lowered by 10% each, tightening to 40% and 50%, respectively.
Guarantor without an existing mortgage loan
If neither the guarantor nor the borrower has a mortgage loan, the borrower's loan-to-value ratio can be maintained at the upper limit of 60%, while the debt-to-income ratio and stress test ratio are both 50% and 60%, respectively.
II. Impact of Mortgage Insurance on Borrowers
If the borrower needs to apply for mortgage insurance, the guarantor's mortgage situation will have an even greater impact on the borrower. When the guarantor already has a mortgage loan, the insurer will increase the premium, and the debt-to-income ratio and stress test ratio will be lowered to 35%-40% and 45%-50%, respectively, making loan approval even more difficult.
III. Guarantor's Loan Record
Understanding the guarantor's past loan record is also important. If the guarantor has other private loans or debts, the monthly payments for these loans will be included in the stress test calculation. If the guarantor's debt situation is not ideal, it may have a negative impact on the credit rating and affect the mortgage approval result.
IV. Income Requirements for Guarantors
When choosing a mortgage guarantor, it is also important to ensure that the guarantor has a stable income, preferably as a salaried employee. The guarantor should provide sufficient income proof documents, such as tax returns, pay stubs, and payroll account records, to fully demonstrate their ability to assume mortgage responsibility.
Choosing the right mortgage guarantor is crucial for the success of the mortgage application. Borrowers should fully understand the guarantor's mortgage burden, past loan record, and income situation to ensure that they choose a reliable and capable guarantor. In this process, borrowers need to maintain good communication with their guarantor to ensure that both parties have a clear understanding of the requirements and responsibilities of mortgage approval and repayment.