Acting as Mortgage Guarantor

Hi does anyone know if the following is possible.
Can a person who has significant cash savings in addition to mortgage free property assets act as a guarantor for a second person in order to secure them a 100% mortgage. Perhaps the guarantor could be the 2nd applicant on the mortgage even if in reality they did not plan to contribute to the repayments or claim ownership on the property???

Hi Kpfg1,

A guarantor is normally required when the primary applicant's income is insufficient to qualify for the loan amount they require - the guarantors assets are not taken into account as they are not being used as additional security. If the primary applicant is not professionally qualified (doctor, dentist, vet pharmacist, lawyer or accountant) and they want to borrow 100% the guarantor would need to either put cash on deposit or use their unencumbered property as additional security.

Kind regards,

Sarah

www.rea.ie

Thanks Sarah,

Indeed the primary applicants income would be insufficient for the mortgage amount required and is not professionally qualified. Is there a difference in the application process (e.g. REA online) to be a guarantor as opposed to a joint applicant?

"Put cash on deposit"

Do you mean give the primary applicant sufficient cash to form a deposit of e.g. 8% to 10%.

Finally if an unencumbered property was given as security does this negate the need for cash and also how long must the property remain as security with the lender?

Once the primary applicant had demonstrated an ability to repay and / or the mortgage amount had reduced perhaps creating some equity in the purchase property could the security property be removed from the mortgage agreement?

Indeed the primary applicants income would be insufficient for the mortgage amount required and is not professionally qualified. Is there a difference in the application process (e.g. REA online) to be a guarantor as opposed to a joint applicant?

No - there go on the application under the heading of joint applicant but with a note to the effect that there are the guarantor.

"Put cash on deposit"

Do you mean give the primary applicant sufficient cash to form a deposit of e.g. 8% to 10%.

Yes - the donor would need to provide a letter confirming that the funds are a gift not a loan and that they will have no legal interest in the property.

Finally if an unencumbered property was given as security does this negate the need for cash and also how long must the property remain as security with the lender?

Yes, and until such time that the loan equates to 90% or less of the property value.

Once the primary applicant had demonstrated an ability to repay and / or the mortgage amount had reduced perhaps creating some equity in the purchase property could the security property be removed from the mortgage agreement

Yes!

Sarah

www.rea.ie

I've a similar question...

I've been told that I will be approved to borrow 202K
With deposit of 18K that'll bring the purchase price to 220K

However, I would like to buy a house worth 235K.

Could I get someone to go guarantor for the last 15K?
Both parents retired...family home worth 1 million or so but I believe that this can't be used as security...what does an unencumbered property mean?

What else can be used as security?
Could an SSIA, either my own (4K) or my parent's be used as security (9K), be used as security for the remaining amount?

My salary should go up at the end of the year...maybe I should wait until then?

If I did have a guarantor how long would it take for the guarantor clause to be removed where 202K is borrowed over 35 or 40 years? Would it be when 15K plus interest was paid back? If I borrowed now and my salary went up at the end of the year could the guarantor clause be removed then?

Any info appreciated.

Thanks

Hi AK,

"Unencumbered" means there is no debt (mortgage) secured against the property. In your case the SSIA's can not be taken into account nor can your parents house. You would need to have a relative who's income is sufficient to cover their own debts and the €15,000 shortfall; perhaps a brother or sister? If you could post details of your basic income and any additional payments plus your age and any existing loan details I can advise you on your maximum borrowing capacity.

Kind regards,

Sarah

www.rea.ie

Thanks Sarah for the info.

I earn 32K basic with 5K bonus package avail (some of it based on doing some exams, some of it as xmas/performance bonus that everyone receives)

Last yr started at 24K basic, rising to 26K basic after 6 months with 7250 bonus paid of similar 8K bonus package avail.

Employer has said that I should be up at least 37K basic next year...I'd say again with 5K bonus package. The basic going rate is actually higher for this kind of work so again this may actually be higher...

Will have no outstanding loans when I apply as I plan to pay off the car loan (5.5K outstanding) before applying as I've been told it will significantly reduce the amount I can borrow... down towards 150K.

Don't have a brother or sister that could act as guarantor. Don't particularly want to ask a relative...not really an option.

With this information would I be better waiting until next year?
I was told by a broker that I would currently get approved for 202K over 35-40 years.

Would you agree or disagree?

Still saving the deposit but have a good chunk of it and wanted to get mortgage approval...I've heard it lasts for 12 months?

I would be comfortable with the repayments even with a 2-3% rise. I've been repaying my parents a student loan (€10K)and rent - combined total of €750 a month for the last year and a bit...the student loan part is nearly paid off. This is just less then the monthly mortgage repayments. Again this wasn't paid out through direct debit so there would be no record of this in my bank statements.

Many thanks for your assistance.

Hi AK,

On your current income and with no loans €205,000 is possible on a two bed (or more) property. IF your employer will confirm the salary increase for next year and assuming this can be evidenced by a payslip prior to completion (i.e. buying a new house that will be ready in 2006) and with no loans you'd qualify for €225,000 on €37,000 plus €5000. I really wouldn't recommend this route however because it would mean committing a 10% non refundable deposit on a property on the basis of a presumed payrse.

Mortgage offers are normally valid for 6 months but can be renewed with updated payslips and bank statements.

Regards,

Sarah

www.rea.ie

Thanks for the info. That's good to know.

Yes I would be purchasing a 2 bed.

The 225K would be before you add the deposit of 19.5K so that would allow for a house over 235K.

Waiting while saving might be a better option.

Thanks for your assistance.