Guarantor issue and principal property

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Foodie1

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Need some advice with sensitive situation in family. My father who is very unwell went guarantor for whole mortgage on my brothers house 12 years ago. I only found out recently. That house is in huge negative equity.

My question relates to my parents family home which is in both my patents name.Does the guarantee arrangement die with my Father or is my mother at risk of losing her house should my brother default on payments?
 
Hi,

The first thing you need to do is get a copy of the loan offer and the guarantee your father signed.
Make sure he didn't co-sign the mortgage offer itself.
Then look at the guarantee. Some of these had a limit either on amount or time (5 years or so). If there's a time limit, it's easy to sort.
If not, then technically the guarantee would form part of your father's estate in the event of his death, but that doesn't mean the family home is at risk.

Best to establish first what exactly he signed, and work from there.
 
A solution might be to put the house in the mother’s name.

Is the brother currently paying back his mortgage?
 
He is guarantor on the whole amount for the life of the mortgage. Yes brother is paying. Another 20 years to go on the mortgage
 
I would say that your mother is at no risk at all

A lot of things would have to happen:

1) Your brother would have to default
2) The house would have to still be in negative equity
3) The bank would have to decide to call in the guarantee
4) The bank would then have to get a judgement against your father or his estate.
5) The bank would have to lodge the judgement as a mortgage against your parents' property
6) The lender would then have get an order for possession

They might possibly go as far as 5) but they would not go to stage 6)

If they did and sold the house, they could only claim against half the proceeds.

Brendan
 
Does the brother have to notify the bank if the guarantor of his mortgage passes ??
 
Brendan Burgess said:
I would say that your mother is at no risk at all

A lot of things would have to happen:

1) Your brother would have to default
2) The house would have to still be in negative equity
3) The bank would have to decide to call in the guarantee
4) The bank would then have to get a judgement against your father or his estate.
5) The bank would have to lodge the judgement as a mortgage against your parents' property
6) The lender would then have get an order for possession

They might possibly go as far as 5) but they would not go to stage 6)

If they did and sold the house, they could only claim against half the proceeds.

Brendan
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The bank can leave the charge on the property and not force a sale. When the ownership changes hands that's when the charge becomes payable. IE if you mother passed away and the property was sold or transferred into one of your names.
 
Just remember that statue of limitations can apply to guarantees.
It's worth getting professional advice on this to get an answer for your parents so they are not worrying about it.
I think @Jim Stafford has written about this previously, either here or on his website.
 
RedOnion said:
Just remember that statue of limitations can apply to guarantees.
It's worth getting professional advice on this to get an answer for your parents so they are not worrying about it.
I think @Jim Stafford has written about this previously, either here or on his website.
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12 yrs before they need to be renewed
 
Yes I understand that. I just wanted to see what kind of hold the bank would have over the house in the next 20 yrs given that Father is very unwell now.
 
Foodie1 said:
Yes I understand that. I just wanted to see what kind of hold the bank would have over the house in the next 20 yrs given that Father is very unwell now.
Click to expand...

If you brother goes into arrears then the bank will enforce the guarantee. The guarantee is really only to cover the negative equity part of the mortgage.

Assume the outstanding mortgage on the property is €300k and the value is €200k. If your brother keeps up the mortgage repayments and property prices continue to increase within a couple of years the €100k negative equity will be gone. Can you brother increase his mortgage payments or pay off a lump sum of the mortgage?

If you brother should fail to pay the mortgage and the property is out of negative equity then the bank wont call in the guarantee they will just sell the property. That will mean your brother will have nothing but your parents house will be safe.

In my opinion the guarantee is a secured creditor on your fathers estate. While they have not called in the guarantee I would expect that they would want another guarantor should God forbid anything were to happen with your father.
 
Sorry to hear about the health of your father.

Provided your parents own their home as Joint Tenants (as opposed to tenants in common) then his ownership in the family home passes to your mother upon his death under the Survivorship Rule (notwithstanding any Judgment Mortgage on it.)

If he has other assets in his estate, such as pension funds etc, then the Executor may have to deal with the PG depending on the wording of the PG etc.

Jim Stafford
 
Hi Jim

Thanks for that. Just to clarify does the executir have to inform the bank of his death( bank that sons mortgage is with)?
 
Foodie1 said:
does the executir have to inform the bank of his death( bank that sons mortgage is with)?
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A well advised Estate might decide not to take out probate until a minimum of 2 years have elapsed, as creditors must issue proceedings against an estate within 2 years. The wording of the PG will determine the time lines for the bank to issue proceedings. As it is a complex area proper legal advice should be taken from an experienced solicitor in probate.

Jim Stafford
 
A question related to this is, if the parents decide to sell and move to a different house,does the guarantee follow them to the new property.
 
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