Unsure about being a guarantor

[Dave20]

So DWs niece is 18 and has a baby girl. She lives with her mum, DWs sister.
Now she’s a single mother and doesn’t want to be on the council list, as she thinks it’ll take too long.
She can rent privately, but needs a guarantor. You must earn a certain wage and be a home owner, which we are.
Now DW is all up for doing this because she trusts she will pay her rent and wants to help.
I have my reservations. Firstly, she’s only 18, never had a job, never paid a bill and a bit naive like young people can be.I think she’s too excited about the prospect of having a nice little flat, and is impatient to be on the council list.
DW is adamant that her niece will always pay her rent and is sensible enough to not go down the road of not paying.

However, even if she has every intention of paying, what if she can’t pay? DW just said, well in that case, we’d be notified that’s she’s fell behind on her payments and we would have to come to an arrangement. Her mum, DWs sister said she would pay the costs. DWs sister isn’t a home owner and doesn’t earn enough, she can’t be a guarantor herself.
But is it really risky being a guarantor? We have a mortgage and 3 children, we remortgage ever 2-5 years. Will this effect our applications? We have a long time on our mortgage.
What if her rent goes up? Does her benefits pay for this? I have no idea how benefits work personally.
I can’t really stop DW being a guarantor if she wants to, but we’re linked obviously financially.
Would a guarantor be linked financially to the person? Does it affect mortgage and credit applications? Is it for the duration of a tenancy?
Is it too risky?

She'll have to stay with her Mum.

Don't do it. My husband is in Property management. We have seen a lot of very upset guarantors over time. Despite it all being explained to them at the time of the tenancy beginning and guarantor forms being signed they never fully understand the risk they are taking. Occasionally Landlords will take a much bigger deposit in place, could you offer to help with that instead? Good luck having this conversation with your DW, sounds like it will be tricky.

I was going to say, can you afford to pay her rent, if she can’t? And are you happy to?

Then I saw your post, which answers my question.

If she defaulted, we couldn’t pay her rent! We don’t have £750 per
*month spare to pay!8

DONT DO IT

I’m a guarantor for my dd. We had to prove that we could pay her rent in addition to our own outgoings. (We are mortgage free so can). I’d do it for my kids, not for anyone else. It’s a massive responsibility.

No

Don't do it. From your post, it shows she's going in very immature, she's never had a job or pay a bill and now thinks she can be responsible for a house and all that comes with it. As well as being a single mum. I say that as someone who had a guarantor, is a single mum and had a job. It's really hard, she, her mum and your DW are all being naive. I'd advise her to stay with her mum, until she has a job, childcare in place and has some money behind her.

You don’t need to be a homeowner, you just need to be able to afford both your rent and the rent you’re the guarantor for - so on £22k, and the rent is £750? No idea how the landlord thinks you can qualify when you have a mortgage payment.

@Dave20

No. A millions times NO. A guarantor agreement is basically an open ended agreement, with a limitless amount to it. Your DW's niece could end up not only 'not paying the rent,' but also trashing the place/causing damage (or her visitors could,) and you could well end up owing 4 or 5 thousand pounds or more .. maybe much more.

You'd have to have rocks in your head (or an unlimited budget) to be a guarantor tbh.

Unless you can easily afford to lose a 5 figure sum, do NOT be this young woman's guarantor.

Guarantors usually need to be earning a certain amount - 3 x annual rent for example. Obviously I don't know what the requirements are for this particular guarantor check, but if the rent is £750 a month and your DW is only on £10k a year, it's highly unlikely she'll be accepted.

I used to be a credit underwriter many many years ago and my advice is No, No, No.

Firstly, it doesn't appear that you even have the details of the guarantee is it for fixed amount and duration e.g. max €6 or 12 months or is it open ended, most likely so you can be caught for any amount until she can be evicted, does the guarantee extend to legal costs if this ever occurred.

Risk wise:-

1. She is 18 with zero track record

1. She has a child which she has to prioritise over rent, God forbid that child needs something, e.g. unexpected medical costs etc. these will have to be prioritised over rent

1. She doesn't want to be on the council list - indicates impatience, entitlement, naivety

1. She has never had a job - would she work if needed etc. to make rent? Questionable if she hasn't to date

1. Never paid a bill - first experience and she'll magically get everything right without hiccups- again this is questionable

1. Her mother cannot guarantee it - her mother has most likely been the most influential in terms of the niece's financial acumen so this doesn't bode well

1. You have 3 children, and have financial commitments yourself

1. Even one month's rent will put a strain on your financials, what happens your guarantee is called it. It's unlikely that you only have to cover 1 month as whatever is causing the issue may reoccur.

The only way you should agree to signing a guarantee is if you can afford to give someone the max amount you can be caught for as a gift. I I guaranteed a niece's college loan of 5k. No matter what happens I am liable for 5k plus interest. If I have to I can cover it. There's no way I would fo any higher.

Your wife needs to luck at fact over feeling in this instance. Maybe she can give her a financial gift of a fixed amount £500 to get her started if she feels that passionate about it. It is a much more sensible option.

Never sign a guarantee unless you can afford to cover it at the maximum amount.

Yes, it is potentially very risky being a guarantor.

If you know you can't cover the costs then you must not agree to be guarantor.

Your niece doesn't have a long or proven history of paying bills (or any history, for that matter). You could end up in a nightmare situation.

I'd also advise against being a guarantor in such a risky situation.

I've done it for three of my own children when they were at university and would do it for any of my stepchildren if necessary (DH doesn't earn enough) but have twice been asked to act as guarantor for the student offspring of friends and have said no. I don't want to have that sort of financial relationship with them.

Definitely don't do it - far too risky, too many unknowns.
Your wife is looking all fondly at the situation through rose-tinted glasses and has got caught up in the emotion of it all I suspect.

It's a very very bad idea indeed.

It’s a No from me too. If she defaults what are you going to do - evict her?

It does not bode well for family relations.

Something similar happened in my family and now they don’t speak.

@Dave20

If she defaulted, we couldn’t pay her rent! We don’t have £750 per month spare to pay! I doubt many would. DW is convinced she’s sensible and will pay and wouldn’t put us in that position.

Every guarantor thinks that, otherwise they wouldn't be a guarantor! And yet people still default.

Don’t do it. We had a lovely family friend, who became guarantor for his friend’s son. He ended up losing his own home and died a broken man. After watching what happened to him, I will never do it.

HNRTT but have you both seen a realistic budget with income and expenditure, including baby costs, clothing, food, utilities, broadband, phones, transport, make up and socialising and everything else plus rent to be reasonably confident the rent is affordable?

Good post from @NeverChange

I have seen 'Can't pay take it away' numerous times, and on every 3rd or so show, they have someone featured who is a guarantor, and their niece/friend/daughter/cousin etc, has not paid the rent or kept up he loan repayments (or whatever the agreement was.)

The 'can't pay' men end up taking their TV, jewellery, the car, their stereo, all sorts, as collateral, until they pay the 3, 4, or 5 thousand owed. They can also have their OWN credit record trashed, and have huge problems getting finance, mortgage, loans, credit cards, and even insurance in the future. They can't even get a phone contract.

Being a guarantor needs to be consigned to he history books. NO-ONE should be asked,or expected to do it.

As @dementedmummy said - don't stand as a guarantor unless you can afford to pay the whole thing. Everyone thinks they won't default, but many do - anyone needing a guarantor is high risk, otherwise they wouldn't need a guarantor in the first place.

@MadMadMadamMim

I wouldn't. I'd be very wary of doing it for my own DC - never mind a DN - because in effect you are stating that Come what may, I guarantee your rent will be paid. I am prepared to put my own house up as security for this. This is why they require house owners as guarantors - to ensure that you DO have the assets to cover this guarantee.

That's what being a guarantor means. If her rent is, say, £700 a month - then you are guaranteeing that you will pay this every month for as long as necessary in the event that she decides she can't or won't. That's a big promise to make for someone...

This....

Would you be 'happy' to do this?

Essentially you'd be giving your niece this money with absolutely no guarantee you'd ever get the moneu back... Her mum can say all she wants about re paying you... But theres a reason she can't guarantee... She is deemed not to have ebough money to do this.

And presumably if you couldn't pay, you would be taken to court for non payment.

Is your wife prepared to do this?

The only people I would do this for are my own children

Do not do it. If DW goes ahead then try to separate your finances as much as possible.

Absolutely dont do it. It could ruin you. You could end up losing everything while the niece just walks away unscathed

No way you would be a fool to do this.

We acted as guarantor for our son’s lets when they were younger. The liability is considerable on my understanding. If your niece defaults it is the rent, default costs, and any damage that the deposit does not cover. I do not believe that you would be advised that your niece is in arrears, and you cannot make good your loss from someone who has no means of repaying you. If your DW is mega close to your niece then do it, but be really conscious of the very real risks. In London and its surroundings I could see you losing £10k on this.