Exclusive: Mortgage Risks Exposed! Understanding the Role and Impact of Guarantors to Make Informed Decisions
Choosing a guarantor is crucial for those looking to secure a loan for purchasing property as it affects future financial risks. Whether selecting a guarantor or acting as one, careful consideration is required to ensure the best decision is made. This article explores the responsibilities and risks of mortgage guarantors:
1.Responsibilities and Risks of Guarantors
Increased Difficulty in Purchasing Property
Guarantors may face greater difficulty in purchasing property themselves in the future. Banks view them as owning a second property when calculating their ability to make payments, resulting in a reduction of the maximum mortgage percentage by one point.
Tighter Income-to-Payment Ratio and Stress Test Criteria
Guarantors' income-to-payment ratios and stress test criteria are increased by 10%, resulting in higher mortgage insurance premiums and greater financial burdens.
Credit Ratings Affected
If borrowers experience late or missed payments, the guarantor's credit rating may also be affected, increasing their burden further.
2.Issues with Guarantor Release
Coordination and Reassessment
If a guarantor wishes to be released, they must negotiate with the borrower and apply for a mortgage reassessment with the bank. This process may be time-consuming and cumbersome.
Time Required for Release
Even if the mortgage is fully repaid, guarantors must wait for the borrower to redeem the property deed from the bank before being released. This process also takes time.
3.Considerations for Borrowers
Cannot Increase Mortgage without Guarantor's Consent
Borrowers cannot apply for mortgage increases without the guarantor's agreement to avoid legal issues.
Before selecting or becoming a guarantor, careful consideration and understanding of their responsibilities and risks are necessary. Guarantors may encounter various difficulties in the guarantee process, such as making purchasing property more challenging, credit ratings affected, and longer times for release. Similarly, borrowers should also pay attention to related issues to ensure compliance with laws and regulations. When selecting or becoming a guarantor, understanding the meaning, responsibility, and risks of guarantees is essential to avoid blindly taking action and ensuring personal interests and future quality of life are safeguarded.