Real estate is an expensive investment to make and sometimes when a buyer has a hard time getting approval for a home loan they ask their family or friends if they can go guarantor for them… but is this a good idea?
It’s understandable that we want to help our friends and family members get into the real estate market, but you need to remember that when you sign as a guarantor for someone else you could be risking the security of your own assets, as well as risking your relationship with the person you’re signing for.
It’s important to carefully consider whether or not to become a guarantor for someone else. Ask yourself if the person you are signing for is trustworthy and if they are responsible enough to make continuous payments.
In the instance that a payment isn’t made you could get a default against your own name, or worse your assets could be sold as collateral to recover the costs of the debt – it’s just the same as if you didn’t make a payment on your own loan.
If you’re thinking about going guarantor for a friend, it’s imperative that you know what you’re getting yourself into, because your own home could end up being on the line. Changes out of the person’s control may mean that they can no longer make payments – what if they become ill, lose their job or have any kind of financial dilemma?
It can be a tough decision and one that you should never feel pressured into. You don’t want to ruin a relationship over financial problems and you don’t want to be liable for somebody else’s debts, so make sure you’re aware of what you’re getting into before signing anything.