Guaranteeing someone's rent - what's the impact?

[oliveinthemartini]

A friend has asked me to be a guarantee for them on their rent.

I am happy to do this, BUT...

Dp and I are looking to get a mortgage in the short to mid term future (currently renting ourselves). Will being guarantor affect anything for us? Dp has just started a new business so all affordability and mortgage calculations will have to be based on my income alone. We are considering shared ownership - which means an affordability check as well as checks from bank etc

Will a mortgage company ask about this? Will it affect what we can borrow?

The only thing I can find online says 'read the documents carefully' but I don't want to get to that stage yet

Thanks in advance

Do you trust the person who is asking you to be their guarantor to pay their rent on time in full? If they did have a problem paying, could you trust them to be upfront with you and could you afford to pay their rent until they sorted themselves out?

Do you know why they are being asked to provide a guarantor? Are you comfortable with the reason(s)?

If you are at all worried and if paying their rent as well as your outgoings would put you in a precarious position financially then don't do it. That's a good enough to decline to be their guarantor without causing a falling out.

With the way mortgage applications are screened now, I think the amount of rent you are being asked to guarantee could well be taken into account when calculating affordability for you.

The mortgage company will not ask as its not an ongoing expense.

I would never ask a friend to do this. What are your friends reasons?

Normally they can offer another months rent as deposit to get over any LL aniexty. If they cannot afford that you probably do not want to guarantee their rent.

You are guaranteeing to pay their rent should they be unable to. Are you aware of this? with the best will in the world and the most trustworthy person, should they lose their job etc then YOU will be liable. Even if they offer to move out, if it is before their contract is up, you can be liable for the whole costs of their rent until this time. Has your friend explained this fully to you? It is a very massive ask, sometimes done by parents for adult children but by friends? Be fully aware what you are signing up for.

can you pay your rent on top of all your outgoings?
if yes I would (maybe) consider. if not just don't.

*your friend's rent

Just be careful - if you are a guarantor, it might be for more than the rent. If there is any obligation to repair / replace etc on the tenant etc and your friend damages the property during the tenancy and then fails to make good, you could be on the hook for this too.

As guarantor, if they fail to pay then you will potentially be liable for the full rent for the rest of the lease term.

The mortgage company has a right to view that as a contingent liability and score you accordingly.

I would not guarantee a friend. I once guaranteed my feckless father's flat lease. He had cancer and I had a guilt trip. He didn't pay so I had to and all the while he spent his money on a diamond necklace for his new partner.

Can you afford to pay all of their rent for maybe several months?

If they defaulted and you had to pay several months rent after you had taken on your mortgage would you be able to do that easily without it affecting your mortgage repayments?

I don't know for sure but I wouldn't be surprised if a question were asked on the mortgage application form about possible liabilities and this would be one.

If I were you I would say that in your position, (new business, new mortgage, uncertain financial position), unfortunately you cannot guarantee the rent.

Personally I would never stand guarantor, (except for my kids when they are starting out). It means that there is a chance you will have to pay as much as six months rent for someone.

We had to get a family friend to act as guarantor for us once, this was because DH was still a student. We knew we would have no problems paying our rent, the agency just needed to cover themselves. If you're not comfortable doing it you can say no but if your friends are unlikely to get into difficulty and this is just a formality then I don't see the harm.

Thank you all very much.

Really good points.

By the way - it is not just a formality that the agency are using to cover themselves. It is a legal contract which means if they, the renters, for any reason, even if through no fault of their own, cannot cover the costs of the rent or repairs - you have to pay in their stead.

I used to work at an estate agency and I saw this happen more than once. It is pretty horrible to get a call saying that your brother/friend/ whatever has done a runner, (due to redundancy, illness, being scammed himself, unplanned pregnancy, breakup of a couple - whatever). Then to have to tell your own wife/husband/partner/kids that you now owe many thousands of pounds.

"But we thought it only meant we believed him to be of good character" "But we didn't think we'd have to pay everything" "But we didn't know.... we thought it was just a formality" Heard it all - and it is horrible...

absolute worst case: Friend moves in and pays nothing from day 1. Landlord has to evict, which takes four to six months.

you'll be paying the rent for that time.

still happy?

In normal circumstances I would run a mile from this.

If hoping to secure a mortgage in the near future I would run several miles away until the person asking was a tiny dot!

Bad idea.

If you are in rented at the moment it may be a moot point. Home owner in England or Wales.

I used my mum as a guarantor on my tenancy agreement. She had to be a home owner and was credit checked.