Parents Guarantee for Mortgage Loans

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dewdrop

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Much publicity in the papers today and this morning on Newstalk that banks are chasing parents who signed guarantees for their children Home Mortgages. I would think that most parents who signed were given to understand that they could be released in a few years when "things improved". Unfortunately events proved otherwise. My query is if a parent signed such a guarantee and has died and the only asset is a jointly owned family home and a joint bank deposit what action, if any, could a bank take against the estate of the late parent as it would seem to me that the estate would have no assets.
 
dewdrop said:
I would think that most parents who signed were given to understand that they could be released in a few years when "things improved". .
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Well who exactly 'were given to understand' and by whom, and why did the parents sign the document if in any case one wouldn't have to come good on it?

I imagine that the bank will go after the estate, the house and the cash.
 
Everyone had selective hearing back in the day. I processed many of these and made it crystal clear to parents what they were letting themselves in for, there was never a promise made that it was only for a few years. Now some of them did get out of it after a few years but that was dependent on the son/daughter's income increasing sufficiently to take over the loan. Most often done for professionals starting out whose income was likely to improve substantially in a few years. It is another unfortunate side effect of what has happened.
 
"My query is if a parent signed such a guarantee and has died and the only asset is a jointly owned family home and a joint bank deposit what action, if any, could a bank take against the estate of the late parent as it would seem to me that the estate would have no assets."

Are you sure that both parents did not sign?

If only one signed and they are dead and the facts are as you outline, I believe the bank has no recourse against the non-existent estate. If both signed, then it changes everything.

mf
 
dewdrop said:
Much publicity in the papers today and this morning on Newstalk that banks are chasing parents who signed guarantees for their children Home Mortgages. I would think that most parents who signed were given to understand that they could be released in a few years when "things improved". Unfortunately events proved otherwise. My query is if a parent signed such a guarantee and has died and the only asset is a jointly owned family home and a joint bank deposit what action, if any, could a bank take against the estate of the late parent as it would seem to me that the estate would have no assets.
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I stand to be corrected on this, but as far as I am aware any claim on the estate must be made within 2 years of death. Also a claim cannot be made on foot of a guarantee unless the original loan was called in first by the Bank.
 
Thanks 44 Brendan. The point is that if the estate has no assets (all would pass to survivor under joint ownership) what would be the point of a bank in going after the estate. The issue of fraudalent preference would not arise as the assets were in joint ownership for many years.
 
No point. Based on your above post there is no fear of a successful claim being made by the Bank against the estate of the deceased guarantor.
 
I know someone who took out a joint mortgage with her mother (even though she is paying it all herself) - is this the same as a guarantee or different?
I would have thought on a joint mortgage you still have life assurance so if the parent dies could the mortgage be written off?
 
Somewhat different. With a joint loan both parties are "jointly and severally liable " for the facility. I.e. both can be separately pursued for the full facility.
A guarantor is only liable in the event that the borrower/s fail to pay the facility. End result, of course may well be the same.
As you say life cover would normally be required for a joint borrower but not from a guarantor.
 
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