No money to buy a house? A guarantor is your savior!

What to do if your income is not enough? Age limit for guarantors? Understanding these key points will make it easy for you to apply for a mortgage!

If you're planning to buy a house but have insufficient or unstable income, applying for a mortgage loan may be challenging due to stress tests. In such cases, banks may require you to find a mortgage guarantor to increase the credibility of the loan. This article will introduce the conditions for mortgage guarantors and the key points to consider.

 

Who can be a mortgage guarantor?

Apart from minors, bankrupt individuals, and mentally handicapped individuals, generally, adults with stable income can become mortgage guarantors. However, they must have a stable income that allows the borrower to pass the debt-to-income ratio and stress tests. In addition, age is an important consideration factor. The bank will subtract 70 to 75 from the borrower's or guarantor's age to calculate the longest repayment period, and age is calculated based on the higher-income earner between the borrower and the guarantor. If the guarantor is older, the repayment period will be shorter, and the monthly repayment amount will correspondingly increase, which will affect the income requirements of the stress tests.

 

What risks do guarantors need to bear?

The legal responsibilities of guarantors are the same as those of borrowers. If the borrower is unable to repay the debt and the bank is unsuccessful in pursuing the borrower, the guarantor must bear the relevant debts and be responsible for repaying the entire loan. In other words, guarantors face unforeseeable financial risks. Therefore, borrowers must choose guarantors carefully to avoid affecting the final mortgage approval result, which may cause their property ownership plan to go over budget.

 

What is the relationship qualification between a guarantor and a borrower?

Generally, borrowers must prove that the guarantor is a relative, including parents, siblings, spouses, or children, etc. If an unmarried couple wants to be a guarantor, they need to declare their relationship to the bank and pass the approval process. Of course, if the borrower and the guarantor have a business relationship, such as being colleagues or business partners, they can also become guarantors, but this requires bank approval.

 

FAQs:

If my income is stable, do I still need a guarantor?
If your income is sufficient, and you pass the stress tests and debt-to-income ratio requirements, then you typically do not need a guarantor. However, if your income is not stable enough, or you need a large loan amount, the bank may require you to find a guarantor.

 

What documents does a guarantor need to provide?
Guarantors need to provide identity documents, income proof, and related documents such as bank accounts. If the guarantor is a relative, they also need to provide proof of the relationship.

 

What impact does a guarantor's failure to perform their obligations have on the borrower?
If the guarantor fails to fulfill their obligations, the bank will require the borrower to repay the entire loan. This will have a negative impact on the borrower's credit record and may result in the inability to apply for loans again.

 

Can a foreigner be a guarantor?
In theory, foreigners can also be guarantors, but they must meet the relevant conditions and requirements, including holding valid visas, having stable employment, etc. Different banks may have different requirements for foreign guarantors, so you can inquire with the relevant bank.

 

Conclusion:

When you need to find a guarantor during the loan application process, you must pay attention to the conditions and responsibilities of the guarantor and choose a trustworthy person. If you have any questions, you can inquire with the bank's customer service department. Only after ensuring that all relevant issues have been resolved can you confidently proceed with the mortgage loan application and achieve your property ownership dream.